Oil prices plunge: WTI nears $10 as storage fears increase
Oil prices continued to slide this morning as traders rushed to withdraw their money from upcoming futures delivery contracts amid fears they will have nowhere to put the substance.
With storage space running severely scarce around the world, exchange-traded funds are trying to avoid a similar situation to last week’s price crash by selling out of the June front-month contract and buying later in the year.
Having fallen around 23 per cent yesterday, US benchmark West Texas Intermediate (WTI) fell 10.3 per cent this morning to trade at $11.46.
The world’s largest exchange-traded product, the United States Oil Fund, has announced that it will shift its holding to later months.
Brent crude, the worldwide standard, steadied after yesterday’s fall, picking up 0.7 per cent to remain above $20.
Analysts said that Brent’s slight rally was due to increased optimism over hopes that some countries would begin easing restrictions soon.
Norbert Rücker, analyst at Swiss bank Julius Baer, said: “While wild price swings are set to last in the very near term, we see more upside than downside from prices around $20 per barrel. The oil price should recover in the longer term”.
Oil storage in focus
Tomorrow the US Energy Information Administration will release numbers for US crude inventories, with levels already on the brink of breaching all time highs.
The main WTI delivery point at Cushing in Oklahoma is also near capacity, with over 70 per cent of space already full and the remaining capacity pre-leased.
ING’s head of commodities strategy Warren Peterson said: “Looking ahead, and all attention will be on inventory numbers this week, and in particular the build we see at Cushing, the WTI delivery hub.
“If we see similar builds to the last few weeks, we will likely reach full capacity at Cushing over the first half of May, which should maintain bearish pressure on the market.”
According to City Index’s Fiona Cincotta, although oil production cartel Opec’s output curbs are due to kick in this week, there is a “growing realisation is hitting that any increase in oil demand will be gradual rather than a sudden jump to pre-coronavirus levels.
“Furthermore the 10m barrel per day Opec+ cut planned doesn’t even scratch the surface of the 30m barrel per day hit to demand that lock down is estimated to have caused”.