Oil Futures Mixed as OPEC Deal Expires

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled shallowly mixed Tuesday, with the May Brent contract expiring at an 18-year low on the spot continuous chart under pressure from the seismic drop in global oil demand and end of a more than three-year production agreement between the Organization of Petroleum Exporting Countries and 10 allied partners that had withheld 2.1 million barrels per day (bpd) in new oil production in the first quarter.

Crude prices have lost close to 70% of their value since their peak earlier this year under pressure from two different fronts that now threaten to undermine the oil industry for the foreseeable future. On the demand side, the coronavirus outbreak that originated in China's industrial heartland late last year swiftly became a global health crisis, shredding major economies, industries and energy consumption. Forecasts now call for global oil demand to decline between 15 million and 20 million bpd, with more downward revisions likely to be made in the coming weeks. Goldman Sachs estimates this week alone global oil demand would collapse by 26 million bpd or 25% from pre-pandemic levels.

As governments around the world tightened travel restrictions and social distancing guidelines, investors and the general public alike are adjusting their outlook for longer-than-expected disruptions to their lives and the economy. The Conference Board on Tuesday reported its Consumer Confidence Index slumped 12.6% over the past four weeks from a multi-month high of 132.6 in February, reflecting consumers' deflating expectations.

The Trump administration and Congress are now in talks on a fourth round of historic stimulus package days after U.S. President Donald Trump signed a $2 trillion economic relief package.

On the supply side, Saudi Arabia and Russia have so far shrugged off international pressure spearheaded by the Trump administration to sharply increase production after failing to secure an OPEC+ production agreement earlier this month. Saudi oil giant Aramco on Tuesday reaffirmed plans to boost production to a maximum 12 million bpd beginning Wednesday (4/1) for the "foreseeable future" and requested service companies to provide "required resources, workforce and equipment" for further output increases.

Reports suggest some OPEC members have attempted to coordinate a low-key policy meeting as early as this week to address the expanding crisis but failed to agree on a date for emergency discussions. OPEC's de-facto leader, Saudi Arabia, has reportedly rebuffed the idea of an extraordinary meeting by saying there was no need for it.

On the session, front-month West Texas Intermediate May futures edged up $0.36 to settle at $20.48 barrel (bbl), while falling 54.4% in March and down over 67% in the first quarter. Now expired ICE May Brent closed at a nearly two-decade low $22.74 bbl, with the June contract settling at a $3.61 premium to May at $26.35 bbl. On the month, the international crude benchmark lost 55% and shed over 65.5% during the current quarter.

NYMEX RBOB April reversed earlier gains to expire down 1.23 cents at $0.5732 gallon, having traded at a $0.3760 21-year low this month, and May RBOB fell a steeper 2.41 cents to a $0.5927 gallon settlement. In March, RBOB gasoline contract led the declines among the oil complex, falling 58.9% and down 66.2% during the first quarter. NYMEX April ULSD contract expired down 0.73 cents at $1.0121 gallon, with May ULSD futures to assume the front-month position after ending at a 1.6 cents discount to the April contract at $1.0015. ULSD contract dropped back 32.1% this month and registered a more than 50% decline during the first quarter.

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


Liubov Georges