WTI oil future contract for June delivery fell below $20 on Tuesday, following Monday’s 14% fall after May contract dropped below zero and reached minus $40 per barrel at one moment, in a historical movement, never seen since the contract commenced trading in 1983.
Yesterday’s fall proved that during the crisis anything can happen, as crude oil was the first to be hit after the virus started spreading in China, the second biggest oil consumer in the world.
Global demand was falling during the period when countries started to close completely on pandemic, with Saudi/Russia price war worsening the situation as two main oil exporters increased production and flooded the world with oil which had no buyers.
Lack of storage further depressed oil price and caused sharp sell-off in past couple of days that culminated in Monday’s historical fall of oil price into negative territory.
June contract is in the positive zone for now, but Monday’s scenario could repeat as the contract nears its expiration, as markets conditions remain unchanged and tending to worsen.
Majority of world countries remain in lockdown, which is likely to extend further and keep demand at minimums that would keep oil price under strong pressure.
Close below $20 zone will again generate strong bearish signal and expose Nov 2001 low at $16.70.
Two reports that are due to be released today and on Wednesday will show the situation wit US crude stocks, which are expected to reach full capacity and additionally weigh on oil price.
Res: 19.24, 20.00, 20.99, 22.16
Sup: 18.00, 16.70, 15.47, 13.14
