Well-placed fears that the world is fast running out of storage for crude buffeted oil prices this week. On an extraordinary day of trading, the spot price of WTI fell deep into negative territory on Monday – closing at -$38 per barrel – for the first time in history. In the days since, both Brent and WTI have recovered a little, helped by President Trump stoking tensions with Iran. In any case, the market is likely to be characterised by considerable price volatility for at least another month until global oil demand reaches its trough.
Turning to next week, June futures contracts for Brent are due to expire next Thursday. We don’t anticipate Brent falling as far as WTI, given that Brent contracts have an option for cash settlement and storage concerns are not as pressing as for WTI. But there is clearly still potential for more gyrations in the oil market, and investors will be closely monitoring any developments in the coming week.
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