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Oil falls as crude in U.S. storage nears all-time high

CommoditiesApr 26, 2020 10:00PM ET
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© Reuters. An oil pump jack pumps oil in a field near Calgary

By Florence Tan

SINGAPORE (Reuters) - Oil prices fell on Monday on signs that worldwide oil storage is filling rapidly, raising concerns that production cuts will not be fast enough to catch up with the collapse in demand from the coronavirus pandemic.

U.S. oil futures led losses after U.S. crude inventories rose to 518.6 million barrels in the week to April 17, near an all-time record of 535 million barrels set in 2017, while floating crude oil storage has hit an all-time high of 160 million barrels. [EIA/S]

U.S. West Texas Intermediate (CLc1) futures fell $1.22, or 7.2%, to $15.72 a barrel by 0122 GMT, while Brent crude (LCOc1) was down 33 cents, or 1.5%, at $21.11 a barrel.

Oil futures marked their third straight week of losses last week - and have fallen for eight of the past nine - with Brent ending down 24% and WTI off around 7%.

"Rising inventories and weak demand are weighing heavily on sentiment," ANZ analysts said.

Trading was extremely volatile last week, in an extension of the selling that has dominated trading since early March as demand collapsed 30% due to the pandemic.

Traders expect demand to fall short of supply for months due to the economic disruption caused by the pandemic. Investors will be watching this week for results from oil majors including Exxon Mobil (N:XOM), BP Plc (L:BP) and Royal Dutch Shell (L:RDSa).

Producers may not be slashing output quickly or deeply enough to buoy prices, especially when global economic output is expected to contract by 2% this year, worse than the financial crisis.

Rig counts in the United States are down to the lowest since July 2016, while the total number of oil and gas rigs in Canada has fallen to the lowest since at least 2000, according to Baker Hughes data.

"The Permian Basin and New Mexico accounted for 62% of the shutdowns; an ominous sign considering this region has been one of the more prosperous in the U.S.," ANZ said.

Kuwait and Azerbaijan are coordinating cuts, while Russia is set to reduce its western seaborne exports by half in May.

The Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, pledged earlier this month to cut output by an unprecedented 9.7 million barrels per day in May and June.

Oil falls as crude in U.S. storage nears all-time high
 

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Comments (5)
Bret Lafrance
Bret Lafrance Apr 26, 2020 10:44PM ET
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Don’t worry, keep buying, someone will tweet that bathing in crude cures carona, reuters and bloomberg will issue a few unsigned “articles” claiming that a pair of universities in alberta have high hopes for the treatment and June oil futires will go up 70%.
Christian Boulais
ChristianB Apr 26, 2020 10:30PM ET
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The OPEC-Russia cuts are in facts 6 Mbd because of the reference level...will they be respected, not sure at all... And bankrupted frackers doesn't mean they stop producing, at the contrary. Nobody has interest to stop producing, the reality of the cuts are a true issue.
Rafi Musayan
Rafi Musayan Apr 26, 2020 9:38PM ET
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sell it or they're are delivering in front of you door
James Holmgren
James Holmgren Apr 26, 2020 8:03PM ET
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That 9.7 billion cut is actually 7.7 billion as the Saudies open pumping full force before the deadline.
Rick Young
Rick Young Apr 26, 2020 8:03PM ET
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when is the deadline???
Frank Delano
Frank Delano Apr 26, 2020 8:03PM ET
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Get out or take physical delivery
Jo Joe
Jo Joe Apr 26, 2020 7:15PM ET
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People will try to run out of June future..
Rick Young
Rick Young Apr 26, 2020 7:15PM ET
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what does that mean??run out of june futers?
JD Baigorri
JD Baigorri Apr 26, 2020 7:15PM ET
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run out means sell
Frank Delano
Frank Delano Apr 26, 2020 7:15PM ET
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Or take physical delivery
Elephan Mann
Elephan Mann Apr 26, 2020 7:15PM ET
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Future contracts are actual contracts for the physical commodity meaning if you let the contract expire without selling it before its expiration date you would be responsible for the entire leveraged price of every contract. if you went long you would have to buy it. If you went short you would have to sell the barrels of oil, or pay someone to. Most brokers will automatically liquidate contracts before expiry date. How are you trading in something you don't understand?
 
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