Oil steadies in dramatic week after historic plunge below zero By Bloomberg | April 24, 2020, 6:23 a.m. | Share:
Crude renewed its decline at the end of a dramatic week that saw prices in New York plunge below zero for the first time in history. U.S. benchmark futures for June delivery were little changed above $16 a barrel after the May contract fell as low as -$40.32 on Monday before expiring the next day. In response, U.S. operators have already started to shut in old wells and halt new drilling, actions that could reduce output by 20 per cent, while Kuwait and Algeria said they are reducing production earlier than required under the OPEC+ deal. The massive glut won’t be cleared quickly, however, meaning West Texas Intermediate and global benchmark Brent crude are still at risk of further declines. In a sign of how severe the supply imbalance is, refiners are hunting for vessels to store gasoline and jet fuel, while an American pipeline operator is looking at ways to free up space on its conduits to storemore crude. With still no clear indication of when demand might recover, the market is set for a prolonged slump that will reshape the industry for years to come. Oil’s collapse will be followed by the weakest recovery in history,according to the World Bank, while consultant Rystad Energy revised down its demand estimates for a fourth time since early March. "There are only two things that can save the market from its current anguish: a recovery in demand or additional supply cuts," said Stephen Brennock, an analyst at PVM Oil Associates. “Tumultuous,erratic, and unprecedented – the curtain is about to fall on a historic week for the oil market." Prices
WTI crude for June delivery fell 6 cents to $16.44 a barrel as of 10:41 a.m. in London
June’s discount to July WTI futures narrowed by almost $2 on Thursday, the biggest gain since that spread began trading
Brent crude for June settlement fell 0.5 per cent to $21.23 a barrel
Traders and brokers are still reeling from the unprecedented price moves earlier in the week. At least fourbrokerages– including INTL FCStone Financial Inc. and Marex Spectron –are restricting the ability of clients toenter intonew trades in the most active oil benchmarks in a bid to curb losses. Tokyo’s stock exchange warned investors that some oil-linked products are seeing large amounts of volatility. Producers and refiners are also starting to declare force majeure in what could be a wave of broken contracts. American shale explorer Continental Resources Inc. told at least one refiner it couldn’t make an oil delivery after the price rout, while the trading unit of Petroleos Mexicanos said it couldn’t import gasoline from at least one U.S. company. © 2020 Bloomberg L.P.