The major markets pulled back last week after two consecutive weeks of gains. Yet, the losses were minimal given the volatility seen this year. As of Friday, the Nasdaq has done the best to recover from the lows of this year. Yet, emerging markets have continued to struggle as the international position is down the most YTD.

The biggest news last week was the activity in the Crude Oil Market. For the first time in history, the price of May Crude Oil WTI futures traded negative and closed at -$37.63 last Monday. This has understandably caused many investors to ask, “How is this possible?”

This is because of the use of futures contracts. Future contracts allow market traders the ability to secure the price a good at a later date with liquidity on a daily basis in the present. Futures contracts have a date when they mature and roll over to the next monthly instrument. But last week, in the case of crude oil, the supply was so great that the market effectively had to pay a buyer to take possession of the May oil contract. In essence, the previous buyer no longer wanted to take possession of the oil because they would have to find a place to store it.
Reuters reported that demand is down over 30% worldwide. With oil consumption down, producers have had to find places to store oil until production and demand come back into balance.
The primary place in the United States for oil to be stored is in Cushing, Oklahoma. The oil hub holds a tank farm with about 76 million barrels of storage capacity, of which 53 million barrels are already being stored there. The remaining space has been largely claimed, leaving little if any room for the additional supply in the coming weeks.
As a result, the domestic oil producers have begun shutting down rigs nationwide. The Baker Hughes Oil Rig Count fell to 465 last week. This marks the lowest active rig count level since August of 2016.
The EIA reported that the peak of weekly U.S. Field production of Crude oil took place back on March 13th, after producing consistently over 13 million barrels per day in the first quarter of 2020.
On Monday, President Trump announced that he would add as much as 75 million barrels of oil to the nation’s strategic petroleum reserve. But this will take time to achieve. Some analysts estimate that the government can only add 2 million barrels per day and then they may even run out of storage capacity in a matter of months.
Oddly enough, the only positive sector last week was Energy. The 1.67% weekly gain was fueled by the immediate recovery in oil and the hopes that more will be done in the future for this segment of the economy.


Bloomberg.com, Bloomberg, www.bloomberg.com/news/articles/2020-04-20/trump-wants-to-add-75-million-barrels-to-strategic-oil-reserve.

“Oil Prices Could Fall below Zero: Analyst.” Yahoo! Finance, Yahoo!, 18 Mar. 2020, finance.yahoo.com/news/oil-prices-could-fall-below-152446634.html.

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The S&P 500® Index is a capitalization index of 500 stock-designed to measure performance of the broad domestic economy through changes in the aggregate market value of stock representing all major industries.

https://us.spindices.com/indices/equity/sp-500

The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.

https://us.spindices.com/indices/equity/dow-jones-industrial-average

The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes over 2,500 companies, more than most other stock market indexes. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indexes

https://indexes.nasdaqomx.com/Index/Overview/COMP

The MSCI World Index, which is part of The Modern Index Strategy, is a broad global equity benchmark that represents large and mid-cap equity performance across 23 developed markets countries. It covers approximately 85% of the free float-adjusted market capitalization in each country and MSCI World benchmark does not offer exposure to emerging markets.

The MSCI Emerging Markets (EM) Index is designed to represent the performance of large- and mid-cap securities in 24 Emerging Markets countries of the Americas, Europe, the Middle East, Africa and Asia. As of December 2017 it had more than 830 constituents and covered approximately 85% of the free float-adjusted market capitalization in each country.

https://www.msci.com/

The S&P GSCI Crude Oil index provides investors with a reliable and publicly available benchmark for investment performance in the crude oil market.

https://us.spindices.com/indices

Companies in the S&P 500 Sector Indices are classified based on the Global Industry Classification Standard (GICS®).

https://us.spindices.com/indices

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