Oil on a free fall again -Rystad Energy comments

The real problem of the global supply-demand imbalance has started to really manifest itself in prices. As production continues relatively unscathed, storages are filling up by the day. The world is using less and less oil and producers now feel how this translates in prices.

As always, you will see days with small up and downs, but the trend will certainly be a decline. At least until some serious help comes to the OPEC+ promised cuts from more producing nations.

Meanwhile, such price levels will continue to force shut-ins and to cause more job losses as operators try to lower costs to be able to cope with the low price environment.

In particular, the WTI Cushing futures for May 2020 are seeing a massive drop this morning to below $15 a barrel, which is a result of the severe oversupply in the crude markets during April, a burden that will also devastate markets in May.

The May 2020 contract has its last trading day tomorrow 21 April, and we are seeing a combination of weak fundamentals for US crude balances as the remaining storage capacity at Cushing of  21 million barrels will be more and more exhausted in the coming weeks, leading to downwards pressure on WTI spot prices. A trading squeeze ahead of the futures contract expiry is exacerbated by the dislocation in the fundamentals this time around, contributing to these large price swings.

Read the latest issue of the OGV Energy magazine HERE.