Oil Futures Steady on Wednesday

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were mixed in pre-inventory trade Wednesday, with front-month June West Texas Intermediate trading near $11 barrel (bbl) as investors gauge rapidly filling storage levels across the globe, with weekly industry data reported late Tuesday showing large builds in domestic inventories.

In early trade, NYMEX June WTI futures were down nearly $0.50 to $11.10 bbl, with next-month delivery July WTI at a $9 premium at $20 bbl. International June ICE Brent futures were little changed at near $19.29 bbl after trading at $15.98 bbl, the lowest trade on the spot continuous chart since 1999. NYMEX May ULSD futures advanced 2.32 cents to 0.7501 gallon, moving off an 18-year spot low at $0.6725 gallon. May RBOB futures rallied 5.75 cents to 0.5678 gallon, edging off a $0.4738 gallon one-month spot low.

After a historic rout Monday when U.S. crude for May delivery traded at a deep negative price, oil futures on NYMEX largely stabilized with traders eyeing a fresh set of inventory data from the U.S. Energy Information Administration due out 10:30 a.m. ET. American Petroleum Institute reported Tuesday a fourth consecutive build of more than 10 million bbl in U.S. commercial crude oil supplies and another build in gasoline and distillate inventories in the week ended April 17. Data showed crude stocks at the Cushing, Oklahoma-hub storage spiked 4.913 million bbl last week. If EIA data is in sync with API forecasts, Cushing's working storage capacity would be 78% full at about 60 million bbl.

Demand recovery remains highly uncertain, with revisions increasing the level of expected demand destruction.

"Our commodity team now projects a 9.2 million barrels per day (bpd) average year-on-year collapse in oil demand in 2020, as opposed to the 4.4 million bpd drop that we initially projected. As a result of steep and immediate demand collapse, the impact of the OPEC+ deal on the global oil balances could take a while to work through. Net, we still see a 12 million bpd inventory build in 2Q 2020 and a 1.5 million bpd build in 3Q 2020, pushing global storage capacity to the limit," said Bank of America Global Research in a note to investors.

Russian officials, however, said Wednesday that it was too early to take any additional actions to stem the slump in oil prices before the global deal agreed by OPEC+ takes effect on May 1. Analysts warn oil prices are at high risk to turn negative again in the coming weeks as nobody wants physical supply as available storage fills up. Reports indicate pipeline operators are telling producers they need to provide proof they will be able to move the supply off the system because they don't want the stranded oil.

A day after U.S. crude benchmark fell into negative territory for the first time, two of the three Texas oil regulators on Tuesday delayed a vote to reduce statewide crude output by 20%, citing legal hurdles. Commissioners Wayne Christian and Christi Craddick requested legal counsel from Texas' attorney general prior to taking up the vote on the petition May 5.

Oil and gas regulators in North Dakota pushed back on the idea of limiting output in their state on Tuesday, as operators have already cut output by roughly 20% in the last weeks.

"I think it's a bridge too far at this point," said Lynn Helms, director of the state's Department of Mineral Resources, while expressing concern that such a move could hurt midstream companies that have invested heavily to build pipelines.

Liubov Georges can be reached at liubov.georges@dtn.com

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