Oil extends recovery from selloff but concern over glut lingers By Bloomberg | April 23, 2020, 6:53 a.m. | Share:
Oil extended its recovery from Monday’s plunge below zero, but trading remains volatile with the market under intense pressure from a swelling global glut. Futures in New York rose as much as 17 per cent to top $16 a barrel. Already inundated with bearish signals, the market shrugged off data from Wednesday showing U.S. crude stockpiles at a three-year high and petroleum demand at a record low. An order by President Donald Trump authorizing the Navy to destroy any Iranian gunboats harassing American ships also lent some support. Prices remain down 75 per cent this year, and more production shut-ins are likely as the value of real oil crashes globally. ICE Futures Europe Ltd. confirmed Tuesday that it had taken steps to prepare for negative Brent pricing, while the Chicago Mercantile Exchange took similar measures earlier in the week. Meanwhile, oil traders are rewriting their risk models to accommodate potentially limitless declines. OPEC+’s deal to slash daily production by about 10 million barrels a day will only take effect from May 1 and will in any case prove insufficient to offset demand losses that could reach 30 million barrels a day. In the U.S., the world’s biggest oil producer, operators have started shutting wells and halting drilling, steps that could cut output by 20 per cent and leave thousands of workers unemployed. "While some may see negative WTI pricing earlier this week as a quirk of the futures market, it’s an ominous sign,” said Victor Shum, vice-president of energy consulting at IHS Markit. It "reflects brutal market forces that are forcing supply to adjust to a much lower level of world oil demand." Prices
West Texas Intermediate for June rose 13 per cent to $15.56 a barrel as of 10:33 a.m. London time.
Brent climbed 9.8 per cent to $22.36 a barrel on the ICE Futures Europe exchange.
Dated Brent, a reference for almost two-thirds of the world’s physical flows, was assessed at $14.21 a barrel on Wednesday, according to price reporting service S&P Global Platts. Oil markets are also having to grapple with a wave of volatility spurred byexchange-traded funds. The United States Oil Fund said it may roll more of its WTI contracts forward due to extraordinary market conditions, while the futures division of brokerage INTLFCStoneFinancial Inc. is limiting the ability of some clients to enter into new trades in the most active oil benchmarks. Oil’s collapse has also caught out funds from Beijing to Seoul and Mumbai as well as causingChinese banksto suspend new positions on crude products. U.S. crude stockpiles rose by 15 million barrels last week to 518.6 million, the highest in almost three years, the Energy Information Administration reported. Inventories at the storage hub at Cushing, Oklahoma, swelled by 4.8 million barrels to 59.7 million, taking it closer to its maximum capacity of around 76 million barrels. There are currently around 34 million barrels of crude in floating storage, with a further 45 million to be loaded onto ships before the end of the month, according to Rahul Kapoor, head of commodity analytics and research at IHS. © 2020 Bloomberg L.P.