Vyacheslav Abramov, Director of the sales office of BKS Broker, commented on the historical drop in oil prices to Izvestia. According to him, now all storage facilities are full, so oil is being sold at large discounts. And it is not always possible to find a buyer, since demand is at a very low level.
According to trading data from the LONDON ice exchange on April 20, the price of a barrel of WTI oil for delivery in may for the first time in history became negative minus $40. Russian Urals crude also started trading at a negative price – up to minus $2 per barrel. Spot (i.e. with immediate delivery) prices for Brent oil also turned negative.
“Tomorrow will be the expiration of the may futures for WTI. In this regard, the quotes of American oil futures are beginning to approach real prices on the physical market. According to the forecasts of the us Department of energy, the excess of oil in the real market can reach up to 30 million b / s, ” the expert said.
According to him, companies are now selling oil at a loss in order not to spend money on preserving wells and not to suffer even greater losses, waiting for prices to recover in the coming months.
“The OPEC + deal will come into force in may, so market participants may not take it into account in the quotes for the coming months. At the same time, the next WTI contract for June delivery is trading 70% more expensive than the may contract, at a price of about $22 per barrel. This indicates the optimism of market participants regarding the recovery of oil prices, ” Abramov said.
The expert believes that Brent oil can repeat the dynamics of the fall in the cost of WTI, but not so much, because in the real market, this oil is the standard of quality.
“However, the June Brent contracts, which are executed on June 30, will have a negative dynamics and prices may go up to $10 per barrel if the market situation does not change. In this regard, we can expect a weakening of the Russian ruble up to 85-90 rubles per dollar in the short term, ” he added.
Given the future prices of Brent contracts, participants expect prices to stabilize in connection with the OPEC+deal. At the same time, the recovery of production in China can help stabilize demand and prices, so the damage to the Russian economy will be, but not lasting.
Artem Deev, head of the analytical Department at AMarkets, noted that futures for delivery in may are traded at a very low price. According to him, these contracts end today, and tomorrow futures for delivery in June will start trading they are already much more expensive.
“This situation reflects a simple fact-demand has fallen so much that no one needs a huge number of barrels of American oil. The uso exchange-traded Fund, which holds the nearest futures for almost $4 billion (150 million barrels), is now trying its best to sell may futures and buy June ones. Therefore, this is the situation on the market. The second reason is the overcrowded oil storage facilities in the United States. For the world oil market, this means a signal for a further decline in quotations for other types of oil, and the ruble-the road to levels above 80 rubles per dollar in the near future, ” he concluded.
Earlier on April 20, WTI oil fell sharply. First, the price of this brand of oil reached the level of April 1, 1986 – $10 per barrel, and then for the first time in history fell below $8 and continued to fall. As a result, the price of WTI oil fell to $0, and after that it became negative.
At the same time, the price of Brent oil is gradually decreasing. It fell to $25.91 (22: 10 GMT) The last time Brent fell below $26 was on April 2.
Last week, a report from the International energy Agency (IEA) reported that world oil demand will decline by a record 9.3 million barrels per day this year amid the coronavirus pandemic.
