Oil prices were mixed on Friday, with weak Chinese economic figures and rapidly filling US crude storage offsetting bullishness built on US President Donald Trump’s outlines for the US economy to emerge from the coronavirus shutdown.
US crude futures hit a more than 18-year-low, extending their losses in comparison to global benchmark Brent, in part due to the coming expiration of the current May contract.
However, later-dated futures contracts were also down as the country’s storage rapidly fills, and producers and traders expect output cuts in coming months.
Oil prices have remained weak even after the Organisation of the Petroleum Exporting Countries and other producers last weekend announced a deal to cut output by nearly 10 million barrels per day in response to weak demand.
Brent futures rose 26 cents, or 0.9 per cent, to settle at $US28.08 a barrel while West Texas Intermediate crude contract for June, which became the day’s more active contract, ended the session down 50 US cents, or 2.0 per cent at $US25.03.
The less active prompt WTI for May delivery tumbled by $US1.60, or 8.1 per cent, to $US18.27, ahead of its April 21 expiration as investors rapidly switched out of that contract into June futures.
The contract slumped to a low of $US17.31 a barrel during the session, the lowest since November 2001.
May WTI futures slumped nearly 20 per cent on the week, based on last Thursday’s settle, while Brent dropped nearly 11 per cent.
Markets were closed last Friday for Good Friday.
China’s economy shrank 6.8 per cent year-on-year in the three months to March 31, the first such decline since quarterly records began in 1992.
The nation’s daily refining output fell to a 15-month low, though there are some signs of recovery as the country begins to ease coronavirus containment measures.
Prices found some support as the US plans to ease lockdown measures after Trump laid out new guidelines for states to emerge from a coronavirus shutdown in a three-stage approach, but the early boost to Brent prices was largely short-lived.
Lending further support, US drillers cut 66 oil rigs this week, the biggest weekly cut since 2015 and bringing the total down to 438, the lowest since October 2016, energy services firm Baker Hughes Co said.
Still, fuel demand worldwide is down by roughly 30 per cent. That prompted major producers including Russia, a grouping known as OPEC+, to agree to cut output by 10 million bpd last weekend.
“If more of the global economy enacts plans to reopen and restores some sense of normality, that could help oil prices find a firmer floor in May, aided by the OPEC+ supply cuts kicking in,” said FXTM analyst Han Tan.
Investors in futures have been unwinding long, or bullish positions in May as stockpiles in the United States have surged by record amounts and storage limits will be tested this summer. U.S. storage at the Cushing, Oklahoma delivery hub for WTI is now 69 per cent full, up from 49 per cent four weeks ago, according to US Energy Department figures.
This has made prices for oil for delivery in nearby months much cheaper than those for future delivery – sending the market deeper into a structure known as contango, which reflects expectations for oversupply.
“This morning’s major disconnect between May WTI and the rest of the energy complex could become even more pronounced during the next three sessions before the May contract goes off the board,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Inflows into the U.S. oil fund has surged as investors seek exposure to cheap oil, dealers said. The fund said in a filing late on Thursday it would adjust its positioning by diversifying from 100% investments in front-month WTI contract to 80 per cent front month and 20 per cent in the second month.
The change is already prompting some traders to sell June futures and buy July’s contract, dealers said, sending the spread between the two contracts to as much as $US4.78, the widest on record.
Money managers raised their combined futures and options net long position in New York and London by 24,323 contracts to 199,543 in the week to April 14, the US Commodity Futures Trading Commission (CFTC) said.