WTI Fell By 12.5% On Tuesday
WTI quotes continue to fall rapidly on Tuesday, the price of Brent is little changed compared to the previous trading.
June WTI futures fell 12.52% ($1.6) to $11.18 per barrel on the New York Mercantile Exchange (NYMEX). June Brent futures were trading at $19.92 a barrel in London by this time, which is 0.35% ($0.07) lower than the closing price of the previous session. Earlier on Tuesday, the drop in their price exceeded 5%.
On Monday evening, WTI futures fell sharply after United States Oil Fund LP, the largest oil ETF, announced its intention to sell June contacts, which account for 20% of its $3.6 billion portfolios. This step was taken by the Fund to comply with the restrictions on the volume of contracts imposed on it by the exchange, as well as taking into account market conditions. The CME exchange, imposing such restrictions, takes preventive measures, fearing that prices for the next futures - as they approach the expiration date - will again go into negative territory due to a shortage of storage facilities for raw materials.
"Diversification of the USAF futures portfolio reduces the likelihood of contract prices going negative by the time they expire," analysts at Oversea-Chinese Banking Corp. said. (OCBC), quoted by S&P Global Platts.
Fundamental factors point to an increase in the excess supply of oil and the exhaustion of storage capacity.
"June contracts are getting cheaper because demand is much lower than the current production level and storage capacity is limited," PwC oil and gas analyst Reid Morrison told CNBC.
According to him, "there will be considerable excitement in the market while countries make decisions on quarantine measures and return to their previous state."
Experts at JPMorgan Chase & Co believe that American producers need to reduce production by 1 million barrels per day in April to avoid filling storage facilities in Cushing in may-June by more than 90%, according to Bloomberg.
At the same time, the recovery in demand for oil in China suggests that the consumption of raw materials will gradually increase in the United States and Europe after the removal of quarantine restrictions.
Since Friday, 23 oil-producing countries have pledged to reduce production by 9.7 million barrels, but this measure is perceived by the market as "too late, too little."
World oil production was until recently about 100 million barrels per day, while demand for it in an environment where two-thirds of the World's population is isolated, may fall to 70 million barrels per day.