Oil WTI soared in price by almost 40%

US, WASHINGTON (ORDO NEWS) — Prices for “black gold” of reference brands during trading on Wednesday evening are actively rising, and the cost of futures for the West Texas-based WTI, after falling to negative levels, jumped by almost 40%.

By 16:45 UTC, the price of WTI soared by 39.8% to $ 16.18 per barrel.

The cost of Brent crude oil is also growing – the June futures for the North Sea oil mixture went up by 16.1% to $ 22.45 per barrel.

As Vitaliy Manzhos, senior risk manager of Algo Capital Investment Group, recalls, “on Monday, the cost of May contracts for WTI crude oil that went out of circulation fell far into the region of negative values.”

“This incredible fact put a lot of pressure on the value of contracts with a later deadline. Yesterday, June Brent crude futures sank below the psychologically significant level of $ 20 per barrel. And this morning they resumed falling,” the expert’s review says.

Meanwhile, the head of the Ministry of Energy of the Russian Federation, Alexander Novak, at a meeting with State Duma deputies said today that the fall in world oil demand is currently in the most active stage, and it is, according to various estimates, 20-30 million barrels per day.

In general, says Artem Deev, head of the analytical department at AMarkets, “demand continues to be pressured by falling demand, as well as supply growth, which, together, led to the complete overstocking of available free storage facilities.” “Already a situation has arisen in which oil simply has nowhere to go, and the unclaimed volume exceeds 15 million barrels per day,” the analyst emphasizes.

Recall that since the beginning of this year, several waves of falling prices for “black gold” have swept across the world oil market. The negative situation is caused by a whole complex of factors: the general overproduction of raw materials, a sharp drop in demand against the backdrop of the rapid spread of the coronavirus infection COVID-19 (a pandemic was announced on March 11) and concerns about its impact on the global economy, as well as the collapse of the OPEC + deal (officially with April 1, but in fact after the futile negotiations of oil-producing countries at the March 6 meeting in Vienna).

Just the last circumstance became the trigger for the collapse of oil prices. In addition, Saudi Arabia announced its intention to increase production and lower oil prices. Later, Iraq, Kuwait, the UAE and Nigeria announced a desire to lower prices.

For the I quarter of 2020, the price of Brent collapsed by 65.6%, and WTI – by 66.5%. Moreover, at the end of March, the cost of the June Brent futures fell below $ 22 per barrel (up to $ 21.72), that is, to a minimum since March 2002, and the May futures for WTI – up to $ 20.1.

On April 12, OPEC + countries finally agreed on a new deal, in which 23 states became parties. The agreement will be valid for two years – from May 1, 2020 to May 1, 2022. In May-June of the current year, production decline will be 9.7 million barrels per day (from the level of October 2018), then – by the end of 2020 – by 8 million barrels, and by 6 million – until the end of April 2022.

At the same time, for Russia and Saudi Arabia, the reference base will be 11 million barrels per day (in the first 2 months, the Russian Federation will reduce production by 2.5 million barrels per day). The new OPEC + deal was a forced reaction of oil-producing countries to the market situation and pressure from the United States. However, in general, it does not overlap the volume of decline in global demand, and huge stocks of raw materials have accumulated in the market.

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