Oil's collapse is deepening and spreading across the entire complex as a massive supply glut brought on by the pandemic (and not helped yet by OPEC+ production cuts) and a worldwide shortage of storage space have touched off relentless rout that has shifted the entire forward curve for oil.
As we detailed earlier, with settlement now come and gone, the May contract soared back higher today...
...and adjustments to the USO allocation (to June, July, and August) prompted a bid in each ahead of the settle which all then plunged back after...
The collapse is reverberating across the oil industry, with prices trading below zero across America on Monday. WTI Midland in Texas - a flagship marker for the U.S. shale industry - was at -$13.13 a barrel, while crude in Alaska was at -$46.63.
Oil is a “dangerous market to trade in right now,” said Pierre Andurand, founder of Andurand Capital Management LLP, in a Bloomberg TV interview. The market needs oil production to fall immediately for prices to recover, he said.
And all eyes will be on the inventory data to see just how fast this glut is building. Crude stockpiles at Cushing - America’s key storage hub and delivery point of the WTI contract - have jumped 48% to almost 55 million barrels since the end of February. U.S. nationwide inventories are estimated to have increased another 14 million barrels last week, according to a Bloomberg survey.
Crude +13.226mm (+13.8mm exp)
Cushing +4.913mm (+14mm exp)
Gasoline +3.435mm (+4.4mm exp)
Distillates +7.369mm (+3.9mm exp)
This is the 13th weekly crude build in a row, 7th weekly build at Cushing
The June contract traded around $13.00 ahead of the API data and lifted very modestly after the print...
“If you start to look at the actual supply-demand situation for oil, it’s not so obvious that by the time those contracts expire, the storage situation around Cushing will be very different than what it is in May,” said Martijn Rats, Global Oil Strategist at Morgan Stanley, in a Bloomberg Radio interview.
“The prices of these futures will need to connect to the physical reality, and they are likely to crack lower.”
As Bloomberg's Javier Blas concluded: " Yesterday was scary. Today is a lot more scary. The whole oil market is screaming oversupply simultaneously."