WASHINGTON (DTN) -- Reversing higher, RBOB and ULSD futures on the New York Mercantile Exchange gained Tuesday on hopes demand will pick up as states gradually ease restrictions on mobility. The June West Texas Intermediate contract remained trapped in decline as the U.S. Oil Fund is selling out of the front month contract as supply at the Cushing hub races toward tank tops.
Heavy selling in WTI futures halted in afternoon trade Tuesday, but the U.S. benchmark remains extremely vulnerable to again move below zero with storage space at the underlying Cushing hub in Oklahoma reported to have been fully booked. Market participants who do not have access to storage are exiting the front-month contract to avoid deeper or even catastrophic losses since they cannot take physical delivery of the crude when the contract expires May 19.
U.S. Oil Fund, a passive retail investment exchange traded fund, is a forced seller this week, with the ETF's managers announcing a full exit from the June WTI contract into later-delivered contracts following last week's plunge by the now-expired May WTI futures to a negative $40.32 barrel (bbl) historic low. S&P Global also advised clients to roll positions out of the June contract into July futures.
At settlement, NYMEX June WTI futures declined $0.44 to $12.34 bbl and next-month delivery July contract narrowed its premium against the front month contract to $5.26 bbl.
June Brent futures on the Intercontinental Exchange advanced $0.47 to settle at $20.48 bbl, and July Brent settled down $0.33 for a $2.28 premium to the June contract ahead of Thursday's expiration. The international benchmark found tepid support Tuesday as governments around the world began to reopen their economies, raising hopes for a gradual recovery in global fuel demand. The gain also comes in front of Friday's start to production cuts by OPEC+.
NYMEX May RBOB futures gained $0.0189 to $0.6672 gallon, with the June contact closing at a $0.0368 premium ahead of the May contract's expiration Thursday afternoon. May ULSD futures reversed off a $0.58 18-year low on the spot continuous chart to settle at $0.6308 gallon, with June ULSD futures settling at $0.7108 gallon.
Demand for gasoline is expected to have increased for a third week through April 24 after more than a dozen states began to ease restrictions on personal travel and businesses, with data from the Energy Information Administration to be reported Wednesday morning. The American Petroleum Institute on Tuesday afternoon reported an unexpected 1.108 million bbl draw in gasoline stocks for last week.
Any demand recovery would be slow and gradual, analysts caution, spanning months if not years. The Bureau of Economic Analysis will release estimates of first quarter U.S. gross domestic product Wednesday morning, with consensus calling for a 3.8% annualized decline. The Congressional Budget Office projects a 39.6% plunge in second quarter GDP, plunging the economy into recession for the first half of 2020. U.S. President Donald Trump said Tuesday economic growth in the third quarter would be "transitional" before picking up steam again in 2021.
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