Planes nailed to the ground. Cars left in the garage. Factories shut down. At the time of the "great containment", there was an historic drop in oil prices in New York on Monday, caused by a drop in demand and storage capacity approaching saturation. The WTI barrel for delivery in May first tumbled to zero before closing at a negative price of -37.63 dollars - unheard of in nearly 40 years of quotation. Tuesday morning, we witnessed a slight rebound in Asia with a return to near zero. If this collapse illustrates the uncertainties linked to the coronavirus, it does not mean that the black gold is no longer worth anything.
Speculation about future deliveries
Oil, like many goods, can be bought "in cash" for immediate deliveries. But in New York, crude oil is a speculative product listed on a "futures" market. "We agree on a price today for delivery at a later date," said Joakim Hannisdahl, analyst at Cleaves Securities , to 20 Minutes . Monday is the price for deliveries of WTI (West Texas Intermediate, a type of light crude) in May which collapsed by 300%, especially because the contracts expire on Tuesday. And nobody wants to get stuck with barrels on their arms at this time. According to the analyst, “this is the first time in history that we have had a negative price for next month's deliveries. It's extraordinary ".
Sales at a loss to avoid having to store oil
A barrel at a negative price means that sales are at a loss. "Those who have positions for May deliveries are willing to pay anyone to get rid of them because they have nowhere to store the crude," says Joakim Hannisdahl. Who reminds him, despite its name, a "barrel is not delivered in a container. Delivery and storage have a cost which explains the negative sales price. ”
Demand and storage crisis
According to the International Energy Agency, crude demand in April should drop by nearly 30% worldwide, to levels that we have not seen since 1995. Despite the OPEC agreement and its partners, who made a commitment in mid-April to reduce their production, crude oil must be stored pending recovery. And in the United States, the world's largest producer ahead of Saudi Arabia, storage capacities are approaching saturation. The tanks at Cushing, Oklahoma - the main hub for WTI in the United States - are 75% full, according to Rystad Energy. At this rate, they should overflow by the end of May.
Satellite view of Cushing, Oklahoma, the main WTI crude storage hub in the United States. The negative price of a barrel for May deliveries is above all a storage crisis (Cushing is 75% full). pic.twitter.com/GExsR9UXlH
- Philippe Berry (@ptiberry) April 21, 2020Cautious optimism for June
If the contracts for the month of May had a dark day, those of the month of June resisted better, abandoning "only" 18% to finish at 20 dollars. In Europe, the barrel of Brent, quoted in London, yielded only 9%, to 25 dollars. As many countries prepare for gradual deconfinement, markets are banking on a rebound in demand. But the coronavirus crisis will leave traces, especially in the air sector: Tuesday, the company Virgin Australia declared itself in insolvency.
Economy
Coronavirus: Oil-exporting countries agree on 'historic' drop in production
- Coronavirus
- Containment
- Economy
- Oil