Too much oil has been pumped, not enough people are buying it, and we’re running out of places to put it.
These facts have combined in recent days to obliterate crude oil values. On Monday, prices for West Texas Intermediate crude contracts for May delivery dropped a stunning 306% and actually fell into negative territory. In other words, some traders were willing to pay buyers to take oil off their hands.
While prices recovered a bit on Tuesday, May contracts remained in negative territory and were trading at minus $10 per barrel. In January, oil was selling at over $60 per barrel.
As the coronavirus epidemic has upended the global economy, demand for oil has dropped precipitously. In turn, oil storage facilities are running out of places to store all the oil that is building up. All of this has led to historic lows for oil and other energy investments.
Indeed, for investors, the drop in oil prices impacts not only portfolios that are invested directly in oil futures contracts. The damage is far-reaching and widespread.
For example, Exxon Mobil’s stock price is down about 45% from the beginning of the year. Several widely-traded master limited partnerships (MLPs), which are companies that service oil industry providers, have lost over 80% of their value in recent weeks. And various leveraged exchange-traded funds (ETFs) and exchange-traded notes (ETNs), which are designed to achieve returns of as much as 300% of certain market indexes, have been completely wiped out. In fact, within the last few weeks several prominent energy-related ETNs have been closed down completely, leaving many investors to lose nearly everything that they put into these products.
Times like these give investors an opportunity to review their portfolios and take an assessment of the advice that their financial advisor have been providing them.
While markets may go up and down and nobody can predict market performance with a crystal ball, financial advisors are always obligated to recommend only those investments that are suitable for their customers. This duty requires advisors make recommendations based upon, among other things, their customer’s age, investment goals and objectives, and tolerance for risk. It also requires advisors to make certain that their customer’s accounts are properly diversified among a broad range of securities and asset classes.
At the same time, advisors must disclose all risks related to any particular investment or strategy, and advisors must always make sure that their customer properly understands these risks.
If the recent market rout has left you with concerns about the investment advice that your financial advisor has given you, then it’s time for you to get another set of eyes to look things over. Contact the experienced securities arbitration lawyers at the law firm of Meyer Wilson today. We represent investors throughout the country and may be able to help you recover money that you’ve lost because of your broker’s bad advice.