Monday’s unprecedented collapse on the US market of May oil futures, driven down to negative territory by a pandemic-induced evaporation of demand that left the world with an oil oversupply and not enough storage capacity — meaning producers were willing to paying buyers to take it off their hands – could be repeated towards the end of May for June oil futures, analysts have noted.
Besides this week’s price collapse of oil futures in the US, the biggest day-to-day price drop in the history of oil trading was also recorded Monday.
Output, especially by small-scale producers, will gradually be wound down for market equilibrium, or a production correction reflecting the dive in demand prompted by these extraordinary times. However, this process will require some time and may be achieved slightly before June, according to a Goldman Sachs estimate.
The below-zero prices have mostly affected holders of futures contracts, the majority of these being traders, not actual buyers of oil. Actual buyers, namely refineries, make oil purchases at average price levels determined over extended time periods.
The Greek oil market is not directly influenced by the US market’s WTI index, but, instead, primarily takes its cue from Brent prices. Their fall was less acute, dropping to a level of 19 dollars per barrel when the WTI had fallen into negative territory. Brent prices then rose to levels of between 20 and 25 dollars per barrel the following day, yesterday.
The current oil market volatility has created conditions for lower price levels but the lockdown does not permit consumers to take full advantage.