• Oil sinks, loses -305% and closes at -37.63 dollars
  • Oil, OPEC: demand down 6.85 barrels per day in 2020
  • Oil, agreement between the major producers to reduce production: all except Mexico sign


April 21, 2020 Another critical day for the oil market after the -300% thud that brought the prices of the WTI contract in May to drop below zero yesterday, plunging to -37.63 dollars a barrel at closing, (a loss, to be precise, equal to -55.90 dollars, or -306%). The reason for the divestments is primarily technical, given that the contract in question expires today, April 21st.

After a recovery of more than + 100% during Asian trading, which brought prices above zero, the prices turn negative again. Earnings, in fact, are reduced and the rise above + 85% is not enough to compensate for the historical collapse of the eve. The prices of the WTI contract in May thus fluctuate around -7.4 dollars per barrel, returning negative. Under the meantime, the WTI contract in June, which capitulates by over -40%, slides down to 11.79 dollars per barrel. Brent also did badly, making -28% at $ 18 a barrel.

Moscow, "purely speculative" price collapse
The Kremlin spokesman, Dmitri Peskov, spoke out against an "apocalyptic" reading of the collapse in the price of the barrel of oil with delivery in May, calling it a "purely speculative" fact. Peskov assured that the Kremlin is closely monitoring the dynamics of price changes and that the Russian government has the necessary reserves to minimize the consequences of volatility. "If necessary," he explained, "all resources will be mobilized." "All the experts report that there is no reason for excessively negative assessments of the current reality," he stressed, "there is no need to give an apocalyptic color" to what has happened.

Analysts: "Perfect storm, the problem is storage"
"The perfect storm has arrived". Thus Deutsche Bank in a report evaluates the tensions on the negative price of the WTI, the reason for which is to be identified, according to an analysis by WisdomTree in the "oil storage margin" which "is becoming very stringent". Deutsche Bank therefore expects that "extremely weak fundamentals will persist for at least the next month. Continued pressure on infrastructure - it is noted - could lead to negative prices before the end of May, on the current trajectory. With Opec + which made the its best and the recovery of global demand that has yet to come, the next more logical step - adds the report - will be a more painful adjustment to the non-OPEC offer ". 

"You are actually getting paid to buy oil and store it," explains Nitesh Shah, Director, Research of Wisdom Tree, recalling that the "expiring contract will deliver the oil between the first and the 31st of May, so who has a long contract and is taking the Physical supply needs a place to store it, "he points out." Likewise, the contract holders in May 2020 would most likely have extinguished it before yesterday's big price moves, saving themselves from big losses, "continues Wisdom Tree highlighting that "all the other forward contracts on WTI oil have maintained a positive price and have not gone as far as the previous month's contract".