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If the WTI price closed trade at the current exchange rate, it would mean an unprecedented historical drop in oil prices in one day, So again, a new negative record could be set. Less than $ 11, quotes from WTI, which is currently down 40 percent today.
There has never been a situation like this today in the history of the oil market, as the price of futures quotes in May and June rose to almost $ 11, after the June price fell well below the collapsed 40 percent May contract.
Liquidity in the May contract market is very low as market participants who do not wish to request a physical oil delivery will apply as sellers on the May and June deadline as buyers, but there are few players in the market who now physically want to buy crude oil
while the coronavirus has reduced the demand side for oil to an unprecedented extent, and the supply side has even increased in April as a result of the oil war.
Oil ETFs only reinforce this process, Because they want to continue moving through their vast purchasing positions at a time when almost nobody wants to request physical delivery.
Liquidity is much lower in the May contract than in June due to the aforementioned.So far, 70,000 contracts have changed hands in May, compared to 435,000 in June, and the June price has not come close to that of the May contract, falling “only” to $ 21.96, corresponding to a drop. 12 percent.
The clear destiny of the May deadline is that the reduction in the production of OPEC +, that is, the rescue army, will only come from May, therefore, there is currently an oversupply in the oil market that there are hardly any buyers in the market.
Tomorrow, according to market information, it is also inconceivable that the Texas oil and gas regulator could restrict oil production in the region. In any case, in view of the collapse of oil prices, there is an increasing probability that the state will intervene in the market situation, even in the way that Trump suggested before, they can buy underground oil reserves in the state, giving farmers immediate money and handing them over at a later date. Put the oil on the surface when demand has normalized.
Cover image: Taylor Weidman / Bloomberg via Getty Images
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