Oil contracts for May went to unusual, negative territory

Live Updates Oil Prices Collapse as Market Faces Historically Low Demand                REUTERS  Richard Carson

Michael McCarthy, chief market strategist at CMC Markets, added that "the prospect of having to pay to sell crude oil provided a brutal reminder of the current unusual economic conditions".

A massive supply glut brought on by the pandemic and a worldwide shortage of storage space have touched off an relentless rout that has shifted the entire forward curve for oil.

"Demand destruction from COVID-19 will see a slower expected reopening of the US economy", said Edward Moya, senior market analyst at broker OANDA, predicting a weak period for oil prices.

The coronavirus pandemic has triggered a domino effect in the world.

Some refineries in China, India, Japan and South Korea have begun purchasing crude oil to take advantage of low prices, which in turn has revived oil demand in Asia and caused some increase in prices.

It marks the first time an oil futures contract has traded negative in history, according to Dow Jones Market Data. WTI Midland in Texas - a flagship marker for the USA shale industry - was at -US$13.13 a barrel, while crude in Alaska was at -$US46.63.

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The main US storage hub in Cushing, Oklahoma, the delivery point for the US West Texas Intermediate (WTI) contract, is now expected to be full within a matter of weeks. The global benchmark Brent crude for June delivery decreased 2.51 dollars to close at 25.57 dollars a barrel on the London ICE Futures Exchange. Riyadh and Moscow drew a line under the dispute and, along with other top producers, struck a deal to cut output by nearly 10 million barrels a day earlier this month.

United States benchmark West Texas Intermediate for May delivery was changing hands at $0.56 a barrel after closing at -$37.63 in NY.

"The WTI May futures contract is due to expire on Tuesday, forcing any holders of that contract to accept physical delivery", ANZ Bank said in a note.

Faced with the situation, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russian Federation, a grouping known as OPEC+, have agreed to cut output by 9.7 million barrels per day (bpd).

WTI for June dropped 43 per cent to US$11.57 a barrel in NY.

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