Traders in the oil markets are getting desperate for any ‘good news’ On Tuesday an explosion in Syria on an oil tanker sparked a 30% surge in the price of West Texas Intermediate – that lasted several hours before prices sank back and fell for a loss on the day.
The explosion on the tanker in the northern Syrian city of Afrin killed at least 10 people, Reuters said citing initial reports from Turkey’s state-run Anadolu news agency.
That saw the price of the front-month June West Texas Intermediate crude briefly trade as high of $US13.69 a barrel on Nymex in New York before turning lower again to settle down by 44 cents, or 3.4%, at $US12.34 a barrel.
It had been trading as low as $US10.07 before news of the tanker explosion as it once again sagged through the session in Asia and into Europe.
In contrast, June Brent crude rose 47 cents, or nearly 2.4%, to $US20.46 a barrel, after a 6.8% drop to $US19.99 on Monday. The contract fell 23.7% last week in the wake of the confusion with the WTI contracts.
Tuesday’s small dip came after the 24.6% drop on Monday and the 32.3% fall last week when the now-expired May contract traded in negative territory on April 20 for the first time in the history of the energy futures contracts.
Oil prices are being driven fears of too much oil, too little demand resulting in a glut that will overwhelm storage facilities around the world. Globally, storage onshore was estimated to be about 85% full as of last week, according to data from consultancy Kpler.
“Oversupply conditions will have [storage] tank tops reached in the coming weeks,” said Edward Moya, senior market analyst at Oanda, in a note quoted by Marketwatch.com. “Oil trade will remain volatile, but any major relief rallies will likely be heavily sold into until the entire energy space starts delivering deeper production cuts.”
BP CEO Bernard Looney told Reuters after reporting a $US4.4 billion loss for the March quarter, that his company expected global oil demand to drop by about 15 million barrels per day (BPD) in the current second quarter due to coronavirus-related movement restrictions.
That is more than the 9.7 million BPD of cuts agreed by the OPEC, Russia, and other allied producers. The reductions are due to be implemented from Friday, May 1.
Traders are also waiting for the weekly supply/demand and production reports from the US Energy Information Administration on Wednesday. US stocks rose 15 million barrels last week and a record 19 million barrels the week before. Stocks are now well over 520 million barrels.
Tomorrow’s report will also update the market on the capacity left at the Cushing storage hub in Oklahoma which is the delivery point for the WTI contract on Nymex.
Meanwhile, gold futures fell for a third straight session decline on Tuesday but ended off the session’s worst levels after a report revealed that US consumer confidence suffered a record drop in April.
According to the Conference Board, the confidence Americans have in the economy saw the biggest plunge in April in modern times as COVID-19 ravaged the country and the economy.
The consumer confidence index sank to 86.9 points from a revised 118.8 in March, a bit worse than economists expected. That’s the lowest level since 2014.
Traders were also looking to tomorrow’s statement from the US Federal Reserve after its two-day meeting and a media conference by chair, Jay Powell. Tomorrow also sees the release of the first estimate of US March quarter economic growth.
Comex gold for June delivery lost $US1.60, or 0.09%, to settle at $US1,722.20 following a low at $US1.704.10 an ounce. July silver which is now the most-active contract, lost 1.3 cents, or 0.08%, at $US15.328 an ounce.
In other Comex trading, July copper which is now the most active contract, ended little changed, up 0.02% to $US2.3455 a pound.
Meanwhile, another fall for global iron ore prices on Tuesday, down $US1.28 or 1.5% to $US82.20 a tonne for 62% Fe fines delivered to northern China.
