After Historic Crash US Oil Prices Rebound into Positive Territory

US oil prices rebounded above zero on Tuesday, a day after futures first ended in negative territory as a fall in demand caused by coronavirus left the world awash in crude.

by Niranjani Jesentha Kumari Prabagararaj

Updated: Apr 21, 2020 10:36 IST

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Traders are now focused on the June delivery

The US benchmark West Texas Intermediate was changing hands for May delivery at $1.10 a barrel after closing at -$37.63 in New York. The May futures contract expires on Tuesday, meaning traders purchasing and selling the commodity for profit had to find someone to take possession of the oil physically.

Yet with the surplus full of markets and storage facilities, purchasers were scarce. 

Traders are now more focused on the June delivery contract which had more than 30 times higher trading volumes. It also rebounded Tuesday, rising to above $21 a barrel in New York after a close of $20.43 a barrel.

A price war between Saudi Arabia and Russia has worsened the crisis. Moscow and Riyadh drew a line under the conflict and, along with other top producers, signed an agreement earlier this month to slash production by about 10 million barrels per day.

The crash of US crude Monday was partly caused by the closely watched WTI storage facility at Cushing, Oklahoma filling up, as well as by traders closing their positions before the expiry of the May contract.

The WTI May futures contract is due to expire on Tuesday, forcing any holders of that contract to accept physical delivery, "ANZ Bank said in a note." With storage facilities fast filling up, particularly at the WTI pricing level, Cushing, there are fears that there will be somewhere to store it.

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