Includes midday price update, comments crude production cuts, hedging.
US benchmark Nymex WTI crude futures bounced back into positive territory earlier today, but the second month contract is falling sharply.
The Nymex front-month May contract, which expires today, was trading at about $5.30/bl at 1pm ET, up by more than $42/bl from its close at -$37.63/bl yesterday. The June contract was down by about $9/bl with trades at about $12/bl.
Ice Brent June was trading at around $19/bl, down by about $6.50/bl from yesterday.
"Any hopes that yesterday's market carnage would be a one-day story have been quickly extinguished as NYMEX reopens," said analysts at Rystad Energy.
The contagion has spilled over to WTI June 2020 deliveries, which could also be well on their way into the red as we move towards physical delivery dates. Brent is not immune to a negative price possibility, but should be more resistant.
The May WTI futures contract had traded in negative territory earlier in the session today before bouncing back to positive numbers.
The historic collapse of the WTI Nymex crude futures into negative trading yesterday sent shockwaves across spot physical markets, in crude and beyond, resulting in a mix of negative outright prices, bloated differentials and total dislocations.
The May contract closed at -$37.63/bl yesterday, taking an unprecedented plummet into negative territory as rapidly filling US storage created a panic, prompting traders to unwind their positions.
US crude output is likely to decline by 1.8mn b/d this year as producers cut spending sharply, US energy investment bank Tudor Pickering Holt said today. The peak shut-ins will occur in May and June, at about 3mn b/d, but that number may increase amid the collapse in prices.
If the June Nymex contract follows May in into the negative, it would prompt many operators to immediately and swiftly shut in production in coming weeks.
The dislocation once again highlights the importance of hedging, which will help bolster cash flows and ensure financial stability through the current volatility. Producers with at least 50pc of their expected 2020 production hedged above $40/bl include Concho Resources, Devon, Chesapeake, Diamondback Energy and Oasis Petroleum, Tudor Pickering Holt said.
Texas regulators today postponed a vote on a proposal to cut the state's oil output by 1mn b/d, saying they want to further explore legal issues.
Also today, US president Donald Trump has ordered his administration to come up with a plan to make funding available for oil and gas companies struggling from plunging demand caused by Covid-19 containment measures. Trump yesterday downplayed the crash in the US oil benchmark as a function of "short sellers" and other traders speculating in the market.
The market is looking to the latest weekly US crude inventory and storage data by the US Energy Information Administration (EIA) due tomorrow. Storage at the Cushing, Oklahoma, hub is filling rapidly, rising by 16.5mn bl in the four weeks that ended 10 April, EIA data showed.
