By Barani Krishnan
Investing.com - White House guidelines on reopening the U.S. economy and talk on what else oil titans Saudi Arabia and Russia could do for production cuts aren’t cutting it for an U.S. oil market practically swimming in crude.
The front-month contract in West Texas Intermediate, the New York-traded benchmark for U.S. oil, plunged to as low as $17.31 per barrel Friday — marking a bottom since 2001 — as it headed for delivery. The contract settled at $18.27, down 8% on the day and 18.5% on the week.
June WTI, next in line to be the spot contract, settled at $25.03 — a near $7 disparity to May WTI due to the woeful prompt demand for prompt delivery crude.
Despite a near-10-million-barrels-per-day production cut agreed on Sunday by OPEC and other world oil producers, crude prices have continued to sink on concerns that actual loss of demand to the Covid-19 pandemic could be as high as 30 million bpd.
“May crude oil is up for delivery as OPEC plus cuts have yet to start, and production drops are not coming fast enough with a glut of oil,” said Phil Flynn, analyst at the Price Futures Group in Chicago. “However, if you look down the curve, prices are looking better.”
June WTI could also get a bump-up in the coming week after the oil rig count published by industry firm Baker Hughes showed a drop of 66 rigs this week and 245 over the past four weeks. The rig plunge indicated production cuts undertaken by U.S. oil drillers due to WTI’s freefall.
Brent, the London-traded global benchmark for crude, performed better than US crude on Friday, though only relatively. Brent’s front-month, which has already moved to June, settled at $28.08 per barrel, up almost 1% on the day. For the week, however, it was down 11.5%.
The White House unveiled late on Thursday guidelines that governors of the 50 U.S. states could use in reopening businesses locked down for four weeks now in an attempt to control the Covid-19 outbreak that has infected more than 670,000 Americans and killed nearly 34,000 of them.
Saudi Arabia and Russia, meanwhile, were ready to do more to help stabilize the global oil markets. Alexander Novak and Abdulaziz bin Salman, energy ministers for Riyadh and Moscow, said in a joint statement that they will "continue to closely monitor the oil market and are prepared to take further measures jointly with OPEC+ and other producers if these are deemed necessary”.