Oil futures down and spot flat as storage starts to fill -Rystad Energy comments

The soon-to-expire WTI NYMEX front month contract for May 2020 settlement has dropped again tremendously this morning in low volumes. With low liquidity close to expiry, these erratic moves tend to happen, but at the same time it is no wonder that WTI for May 2020 is seeing such low prices relative to the June 2020 contract.

This is because the market knows that the US crude stocks will fill very rapidly, also in Cushing, Oklahoma (delivery point for the NYMEX WTI contract) in the next few weeks as refinery runs continue to be cut tremendously in the US due to a lack of storage possibilities, especially for unsold gasoline.

We believe US commercial crude stocks will be at all-time-high levels by the end of April, with continued builds expected into May as well.

Other spot prices have stayed largely flat, or tripped down a little, as economic indicators in China and other countries now show the extend of the Covid-19 damage. The enthusiasm about US President Trump’s intention to end the country’s lockdown seems to be dying down as traders realize that a full return of the economy will not come overnight, or anytime very soon for the matter.

It will take more courageous production cuts outside OPEC+ for the market to balance and prices to recover as the demand-supply imbalance is not going away. This is a crisis that needs bolder mobilization from producers and that either way will take a toll on either prices or production, let alone jobs.

Read the latest issue of the OGV Energy magazine HERE.