U.S. oil prices have stayed relatively stable at around $40 a barrel since the start of the summer, having rebounded from the negative price of -$37 per barrel on April 20, EIA data shows.
The collapse of oil demand due to the lockdowns in the spring and the building of inventories at the key U.S. hub at Cushing, Oklahoma, contributed to the plunge of the West Texas Intermediate prices in April.
On April 20, the price of WTI Crude crashed below zero to close at -$37 a barrel—the first time the WTI Crude futures contract had fallen below zero since trading began in 1983. On April 21, the international benchmark, Brent Crude, crashed to below $10 a barrel—at $9.12 per barrel, its lowest daily price in decades.
Curtailed refinery operations and inventory builds in the spring of 2020 were some of the reasons for the oil price meltdown in April. According to a recent report by the U.S. Commodity Futures Trading Commission, unusually high open interest in WTI Crude futures was another cause for the benchmark plunging into negative territory. The high open interest, the report said, coincided with a shortage in storage space and the unprecedented destruction of demand resulting from the coronavirus pandemic. The report added that open interest in WTI reached 634,727 contracts on April 2. This compared to a 12-month average peaking at 430,000 contracts.
Since the crash in April, U.S. oil prices began to recover by June and reached the $40 a barrel mark on July 1. WTI Crude prices have largely remained around that price level for most of 2020.
Prices began to rise from the low $40s in November when encouraging news about vaccines gave market participants hope that economic and oil demand recovery would speed up in 2021 with the rollout of vaccines.
At 10:06 a.m. ET on Tuesday, WTI Crude traded at $49.51 a barrel, up by 3.97 percent on the day, as the market was expecting the OPEC+ decision on production for February after talks stalled on Monday and were adjourned until Tuesday.
By Tsvetana Paraskova for Oilprice.com
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