The U.S. oil futures on Monday plunged nearly 25 percent amid fears over a growing scarcity of oil storage space, leading to huge losses for oil traders, with experts here generally agreeing that the oil market is at risk and investment needs to be cautious.
The shock in the international crude oil market not only caused the collapse of singapore-based HLT, an internationally renowned oil trader, but also spread to a number of listed companies. The extent of the impact on banks, transport, logistics and power producers immediately caught the market's attention.
Shares in UOB, OCBC and DBS fell 2.30 percent to 3.16 percent last week, according to the SGX report. Among oil consumers, SIA, which is selling additional shares to raise cash, lost 3.05 percent last week, ComfortDelGro 5.92 percent and Sembcorp Industries 6.25 percent.
Experts here have warned that investors should avoid risk and make rational and prudent investment decisions amid the situation.
In an interview with Xinhua on Monday, Duan Jin Chuan, a professor at the National University of Singapore (NUS) Business School said that any negative commodity price is an "abnormal phenomenon" that has not been seen for nearly a century.
The COVID-19 pandemic has a catastrophic impact on the global oil and gas industry, which has led to weak consumer demand and significant oil oversupply. In contrast, while Brent crude oil prices fell, it still hovered around over 20 U.S. dollars per barrel, Duan said.
On the trend for future oil prices, Fu Qiang, associate professor at the NUS Business School and academic director of the Executive MBA program, told Xinhua in an interview on Monday that although the huge volatility of WTI crude oil futures prices comes largely from abnormal disturbances at the trading level, oil prices will remain sluggish in the short term.
The high degree of uncertainty of the epidemic has dealt a heavy blow to the economy, and there is "no light at the end of the tunnel (for a quick) future recovery," said Fu.
"A V-shaped rebound is unlikely, and energy demand will be absent for a long time."
As for OPEC+ production cut agreement, it cannot substantially hedge the demand gap and its implementation cannot be effectively guaranteed, Fu said.
At the same time, shale oil production in the United States is highly decentralized, which means it is hard to control and may not be closed in the short term, he said.
On how investors should invest rationally and prudently, Duan said that investing in crude oil futures is dependent on speculation. Futures trading is essential for institutions that have commercial hedging needs, such as oil producers, petrochemical plants and airlines, he said,
For general investors, if the goal is to enhance the portfolio's response to energy risk factors, they can avoid the highly leveraged crude oil futures and directly purchase oil index funds, Duan said.
It is difficult to guarantee that the oil values will not collapse into negative value again, even in June, said Fu.
Huang Hongliang, who works for French energy producer and supplier Total and is in charge of the market development of specialty polymers in Asia, pointed out in an article in Singapore's Lianhe Zaobao on Monday that global economic activity has slowed significantly due to the COVID-19.
It is estimated that the world's crude oil demand has been slashed by 30 percent, down from about 100 million barrels per day previously, he said.
Editor:Cherie
