US crude oil prices hit historic low! Good or bad? DECODED! Anil Singhvi gives 5 key takeaways

Today, US oil price futures plunged to historic lows. They fell under $0! Yes, into negative territory. Truly an unimaginable event for investors and the rest of the world to understand. Zee Business Managing Editor Anil Singhvi has decoded this significant event for everyone in India. He says that the falling crude oil prices have more negatives than positives under the current coronavirus pandemic lockdown scenario. While crude oil is available at such discounted price, the lockdown situation has made the situation precarious for India with all economic activity coming to a halt, he says.

Oil price futures in the US turned negative on Monday for the first time in history. West Texas Intermediate crude for May delivery shed more than 300 per cent to settle at -37.63 USD per barrel on the New York Mercantile Exchange. What it means is that oil producers are paying the buyers to take the commodity off their stocks!

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Anil Singhvi's 5 Key takeaways for investors:  

1. Anil Singhvi says that what has happened today is an anomaly. He said going forward it was highly unlikely that the crude oil prices would ever come below USD 40 per barrel. He adds that what hedge funds have learnt from this episode is to buy crude oil within limits in future. There will be a rethink in strategies for all future position.

2. From the India standpoint, an investor would have been better-off had he been in a position to buy crude oil at say USD 10, USD 5 or may be at lower levels, but Brent crude is still hovering around USD 25.

3. A bear market does not augur well for oil. Yesterday's fall was primarily because of demand-supply reasons where selling happened on account of oil futures' contracts expiring. Prices are primarily falling because of lingering dangers for global economies entering recession. There is a demand-supply match for crude oil under current circumstances with ebbing demand.

4. If the demand is not adequate, the falling prices will have a very limited impact.

5. The fact that crude oil prices may not see substantial appreciation for a long time holds good for India as its import bills account for a lion's share from crude oil imports. 

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The country has many challenges before it, once the lockdown is lifted. So, at least, oil import bills would remain in check for the country.