“This is an extraordinary event.” Energy Sec. Dan Brouillette discusses the importance of keeping the energy industry strong during the pandemic.
. The contract expires today, which means that thin trading volume has contributed to the wild price action.
The front part of the oil futures 'curve,' which is the May contract that expires today, was hit the hardest since it applies to fuel that's set to be delivered while most of the country remains on lockdown thanks to the coronavirus. The only buyers of oil futures for that contract are entities that want to physically take the delivery like a refinery or an airline. But demand has dropped and storage tanks are filled, so they don't need it.
And as storage continues to fill, some are warning that prices could trade at extremely depressed levels for the foreseeable future. "Even as OPEC++ oil production cuts are set to kick in May 1, and supply and inventories should tighten significantly in 2H'20, the next 4-6 weeks are seeing severe storage distress, likely to drive wild price realizations and unusual disconnects, including supercontango and negative prices," Citi analysts led by Eric Lee wrote in a note to clients Monday.
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