Barring any steep jump the rest of the session on Friday, prices are heading for their eighth weekly loss in the last nine, one of the most volatile weeks in the history of oil trading, with nearby expiring May U.S. West Texas Intermediate falling into negative territory to minus $37.63 a barrel on Monday, while Brent fell to a two-decade low.
Traders are saying the late week rally is being fueled by short-covering rather than speculative buying. Nothing has changed in the fundamentals to turn the energy complex bullish the last three days. Once the coronavirus is under control, output should rebound as well as prices, but don’t expect output or prices to return to pre-virus levels for years.
Week Began With Extremely Bearish Outlook
Excess supply caused by the economic fallout from the coronavirus pandemic hammered crude oil at the beginning of the week.
The selling pressure was so strong, the front-month U.S. futures contract fell into negative territory for the first time in history and set a record for the number of contracts traded on Tuesday. The surge in volume and volatility prompted the CME Group, the world’s biggest commodities exchange, to raise margins on crude oil futures.
Coronavirus Inflicted Demand Destruction
Crude oil prices have plummeted by close to 80% this year as the pandemic has spread across the world and every sector of the economy, killing nearly 180,000 people, routing financial markets and leading…