The epic oil collapse continues. WTI managed to jump back to the positive territory after sinking below zero for the first time ever. But the uptrend was short-term and the quotes slipped again to the red. Brent dropped below 25 US dollars per barrel first time since the new OPEC+ deal was reached. At one point, oil quotes went below 20 US dollars per barrel. The ruble has no other choice but to follow the oil’s downward trajectory. US oil came in focus today due to the biggest price drop ever. Market participants have realized that oil futures may easily turn negative. At some point, WTI futures for May were trading negative at 40 dollars 32 cents per barrel. Given the current situation, it may take longer than expected for the global economy to recover. This means that the spot market is also at risk of collapsing.
The situation with oil prices reflects the current oil glut in the world. Experts fear that soon global oil storage facilities will be completely full.
Yesterday, WTI futures for June delivery were holding steadily high. On Tuesday, however, oil quotes are sinking again. In the early trade, US crude lost more than 4 dollars and settled at 16 dollars 18 cents per barrel.
After yesterday’s price shock, markets are getting ready for the worse. Amid this pessimistic sentiment, Brent oil renewed its April lows. Brent oil futures for June have plummeted by 20% with price sliding below 20 US dollars per barrel. It is hard to say now what the oil’s next target will be.
A steep decline in oil demand remains the main negative factor for energy market. The rise in crude demand strongly depends on how quickly the global economy will recover after the lockdown restrictions are lifted. Today, oil traders will look ahead to industry data on crude inventories from the American Petroleum Institute. On Wednesday, the report from the US Energy Information Administration is due to be published.
Today, the Railroad Commission of Texas will hold a meeting. Perhaps, amid a dramatic fall of the May WTI contract, the oil regulator will insist on reducing production.
The ruble opened the trade with small losses against the US dollar but later it dropped considerably lower following slumping oil prices. The dollar/ruble pair is gaining more than 2% and has settled at 77 rubles per dollar.
The next upward target for the pair may become the level of 80. Currency interventions introduced by the Russia’s Central Bank may serve as local support for the ruble and stop it from a rapid drop. The regulator is expected to increase currency sales amid tumbling oil prices.
Oil traders are worried about the current situation in the market. Crude prices may undergo correction after such an extreme downward rally and this may take a few days.
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