Market wrap: Gilead Sciences counters WHO as shares sink; WTI's historic price tank

Gilead Sciences could not sustain recent highs as shares fell 8% after leaked WHO reports found its Covid-19 trial drugs ineffective. Meanwhile, WTI crude fell to -US$38 a barrel with oil's demand wipe-out.

Here are some headlines that dominated global financial markets this week.

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Why Gilead Sciences’ stocks soared, then fell, then rose again

Last Friday 17 April 2020, US pharmaceutical group Gilead Sciences saw its share price hit a two-year peak of US$86 per share, after reports a day earlier had pointed to largely positive clinical trial data regarding the use of an experimental antiviral drug named remdesivir to treat coronavirus patients.

Those findings had been derived from a study conducted by the University of Chicago of 125 Covid-19 patients, among which 113 were classified as having severe infections. The patients were given daily infusions of the drug, and according to health sciences new site STAT, nearly all patients recovered from their symptoms and were discharged in less than a week.

Things, however, took a turn this week for the US drug maker’s share value, when the World Health Organization (WHO) reportedly wrongly uploaded a draft document that showed that a Chinese trial of the same drug had returned negative findings. The report, posted on Thursday 23 April 2020, had concluded that ‘remdesivir was not associated with clinical or virological benefits’.

The WHO proceeded to remove the summary, but by then it was too late, as Gilead’s share price quickly plummeted nearly 8% in the next two hours, based on IG trading data. Open market data showed a nearly 9% decline.

Gilead quickly responded to the WHO’s report, with spokesperson Amy Flood stating that 'the (WHO) post included inappropriate characterisation of the study’, and ‘cannot enable statistically meaningful conclusions’ as it was terminated prematurely.

She went on to add that on the contrary, 'trends in the data suggest a potential benefit for remdesivir, particularly among patients treated early in disease’.

Following the clarification, Gilead’s share price rebounded 3.8% on IG’s trading platform to close Friday’s session at US$79.63.

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Why WTI crude oil price fell to a historic -US$38 per barrel

This week’s other big story was oil’s massive and historic price crash, which took West Texas Intermediate (WTI) crude oil index down as low as -US$37.63 per barrel on Wednesday, as oil producers were forced to pay traders to buy oil off their hands as a result of a storage shortage in the face of the current coronavirus-driven oil demand wipe-out.

IG’s oil futures prices also reflected the commodity’s bearishness, with US (WTI) crude and Brent crude futures each plummeting massively to platform lows.

A point to note here for traders is that IG's prices are created from the two nearest futures contracts on the underlying commodity, as these tend to be the most liquid contracts. Over the period, as we're pricing from two specific contracts, our undated price gradually moves from the nearest contract to the next.

According to Dr Alex Koberle, Research Fellow at the Grantham Institute – Climate Change and the Environment, while oil prices are likely to remain low due to the demand drop, this week’s negative oil prices are only ‘transient’ for several reasons.

‘First, they are a result of specific market issues. North America saw negative oil prices in WTI index largely because contracts for delivery the following month (May 2020) close on the 20th of each month, and on Monday there were only sellers in the market and no buyers. With no space left to store oil that had already been produced, traders were paying others to take it off their hands,’ he explained.

As for European oil prices, which are based on the Brent crude index, the fall was not as steep because May 2020 contracts will only close on 30 April. As such, Koberle said that it remains to be seen how Brent prices will play out next week.

A day later, oil prices began to bounce back, with US crude and Brent crude rallying over 150% and 35% to US$18 per barrel and US$25.50 per barrel respectively. Koberle noted that the rebound came quickly because traders have already moved on to June contracts.

While this might suggest that traders are expecting demand to rebound or supply to shrink in the coming weeks and thus a return to high oil prices, Koberle cautioned that this is ‘very uncertain’, because of the ongoing tensions and lack of cooperation between the US, Russia and Saudi Arabia.

‘Furthermore, although several producers have announced that they will begin to shut their wells, many are unlikely to return to production due to geological reasons. So, while Monday’s negative prices are likely to be transitory at least for now, a return to high oil prices is uncertain in the short-term,’ he said.

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