Crude oil futures are set to finish the week sharply lower despite a two-day counter-trend rally on Thursday and Friday. The price action suggests that even tremendous levels of monetary and fiscal stimulus from central banks and governments, traders believe the global economy is destined to fall into a coronavirus-driven recession.
Any Gains are Likely to be Temporary
Tumbling demand due to the coronavirus outbreak combined with the collapse of the OPEC+ deal to curb production is expected to bring in a wave of supply starting April 1.
Saudi Arabia, the defacto leader of OPEC, which kicked off a price war with Russia that sent prices plunging, is planning to keep pumping at a record rate of 12.3 million barrels per day (bpd) for months.
“From April 1, about 4 million bpd could flood the markets, potentially pushing down crude oil prices into the teens,” Jefferies said in a note. “Unless somebody intervenes, no oil producer benefits from the current environment.”
Oil Plunge Sets Off Search for Tanks, Revives Dormant Cushing Storage Trade
Reuters reported on Tuesday that rates to store oil at one of the world’s biggest trading hubs are surging, as traders globally scramble to secure space in tanks to cope with slumping demand from the coronavirus outbreak and a flood of supply from the Saudi-Russia price war.
The need for a place to park all that surplus is breathing new life into the market at Cushing,…