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© Reuters. By Barani Krishnan
Investing.com: From an unloved market, US crude has become something that oil traders seem not to have enough of.
West Texas Intermediate, the benchmark for New York-traded crude futures, has gained 65% since Tuesday’s deal, rising like a phoenix from the ashes of Black Monday when it fell 126% to subzero prices. of demand destroyed by the Covid-19 pandemic.
Minus epic percentage moves, WTI, of course, was nowhere near its old self, trading almost $ 45 below the barrel below where the year started.
“We need to take this rally with one ounce of caution … do two ounces,” said Igor Windisch of the IBW Oil Brief, noting a continuing demand deficit of at least 20 million barrels of crude oil per day compared to production. .
“Don’t kid yourself, because you can and probably will be caught by the fundamentals,” Windisch wrote, adding that the upcoming production cuts by OPEC were also included in the WTI. “No, the fundamentals have not changed in the last 48 hours. They’ve actually gotten worse: all parts of the equation, supply, demand, and stocks. “
WTI’s first month contract settled at $ 16.50 a barrel, up to $ 2.72, or 20%, on the day.
, the global benchmark for London-listed crude, put on a more modest show: it rose 96 cents, or about 5%, to $ 20.37.
WTI’s superior performance in June appears to be fueled by optimism among most crude traders in the past two sessions that US drillers will cut production faster and deeper than previously thought in the oil shale basins. who deployed hydraulic fractures or hydraulic fracture.
“We estimate that the total number of fracture operations started will end below 300 wells in April 2020; about 200 in the Permian and less than 50 wells in Bakken and Eagle Ford, ”consultancy Rystad Energy, based in Oslo, said in a note. “This translates to a 60% decrease in fracture operations started between the maximum level seen in January to February 2020 and April 2020, as most public and private operators implement generalized fracture vacations.”
Underscoring that sentiment, the Oklahoma energy regulator on Wednesday allowed production cuts and even closings by drillers in the state who felt it was not economical to continue pumping, although they still wanted to keep their leases.
It was the first victory for regional oil groups seeking relief from state regulators after Texas on Tuesday postponed a decision ordering production cuts by drillers in the largest oil-producing state in the United States.
However, some like Windisch urged caution among those tempted to take long, cool positions in June WTI.
“June could see that storage tanks are struggling to come out of the top, in which case the days that expire next month could see another restriction,” wrote Francesco Martoccia, senior associate in commodity research at Citi, in a note to customers.
John Kilduff, founding partner of the New York Again Capital energy hedge fund, agreed with that view. He said that the planned production cuts of 9.7 million barrels per day by world oil producers such as the United States, Saudi Arabia and Russia unfortunately did not reach the projected loss in demand of up to 30 million barrels per day.
“In my opinion, the June WTI contract will repeat what May did,” Kilduff said. “It will crush more and more and more at maturity and will probably turn negative at some point.”
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