Oil Future Mixed in Tuesday Trade

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange moved mixed in the early hours Tuesday, with the June West Texas Intermediate contract falling to $10 overnight as market participants continue to roll out of front-month futures into July or later dated contracts, fearing another bout of subzero prices, with Cushing storage capacity fully leased out.

On Monday, United States Oil Fund announced it would sell its entire portfolio of WTI futures for June delivery over the next three days in favor of longer-term contracts, pressuring the front-end of the WTI forward curve. The fund's rough breakdown will now be as follows: 30% July contract, 15% August contract, 15% September contract, 15% October contract, 15% December contract and 10% in the June 2021 contract.

Hours after USO's announcement, S&P Global, the biggest commodity index in the world, is reported to have told clients to roll their exposure into deferred months.

Bloomberg News reported, "[T]his unscheduled roll is being implemented based on the potential for the June 2020 WTI crude oil contract to price at or below zero as well as the steady decline in open interest for the June 2020 contract."

Oil complex came under aggressive selling pressure amid a combination of factors, including suppressed demand due to coronavirus travel restrictions and the lack of available storage capacity in the United States and globally.

Russia's Energy Minister Alexander Novak believes oil prices won't recover until the second half of the year after an OPEC+ agreement to cut 9.7 million barrels (bbl) in production slows supply growth. The agreement takes effect Friday. Investors believe their efforts are "too little too late" to offset a 30% slump in global oil demand.

In early trading, NYMEX June WTI futures dropped back more than $2 to $10.75 bbl following the now expired May contract's settlement at negative $37.63 bbl on April 20. The July contract sharply widened its premium against the front-month contract by more than $2 to a $7.25 bbl.

ICE June Brent futures softened, trading below $20 bbl. Next-month delivered July Brent traded at a nearly $3 premium to the front month ahead of the June contract's expiration Thursday afternoon.

NYMEX May RBOB futures gained nearly 1 cents to trade at $0.6575 gallon, with next-month June contact's premium at more than 4 cents ahead of the May contract's expiration Thursday afternoon.

May ULSD futures remained under pressure, trading near $0.60 gallon after falling to a $0.58 18-year low on the spot continuous chart. Next-month delivered June ULSD futures traded just below 0.70 gallon.

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

(BAS)

Liubov Georges