Bank of America just raised its EUR/USD forecast
By Barani Krishnan
Investing.com - U.S. crude mounted a comeback Monday, fighting to get into positive territory as bulls faced off with bears to try and keep a barrel of crude above $10.
But the West Texas Intermediate’s eventual foray into negative pricing seems inevitable as more investors flee the spot month to contracts further down the calendar, while physical storage for oil — the alpha and omega in the market now — remains critically short.
“We can keep this market at above $10 now but there’s no possible way to keep it from going to subzero, not with the way people are fleeing from the front-month and clamoring about storage,” said John Kilduff, founding partner at New York energy hedge fund Again Capital.
June WTI was at $12.27 per barrel by 2:00 PM ET (17:30 GMT), down 51 cents, or 4%. WTI plunged to as low as $10.09 in Tuesday’s Asian trading, losing 21% after Monday’s 25% slump, before rebounding.
Brent, the London-traded global benchmark for crude, was down 57 cents, or 2.5%, to $22.50.
June WTI’s collapse in the previous session was triggered by the United States Oil (NYSE:USO) ETF's unexpected move to sell all its holdings in the most active U.S. crude futures contract to spread its risk further down the calendar to June 2021.
S&P also announced thlargest at its commodity index will roll from the June oil contract into July.
The Chicago Mercantile Exchange, meanwhile, raised its margin requirements for all forward oil contracts. That could force more investors to bail out of crude to raise cash, a vicious cycle that could send prices even lower.
Notwithstanding the actions of the USO Fund or the margin requirements set by the CME, physical U.S. crude itself is trading at a discount of $2 per barrel or more to June WTI — which has to converge with the physical market before its expiry in another three weeks.