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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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The Very Real Possibility of -$100 Oil

An oil analyst who warned of negative oil prices a month ago now says that the WTI Crude futures prices could crash to as low as a negative $100 per barrel in May.  

In a note last month, Paul Sankey, managing director at Mizuho Securities, said, “Oil prices can go negative,” reported Fox Business

Back then, in the middle of March, most analysts did not believe that oil prices could sink into negative territory and said the ‘negative oil price’ was just an attention-grabbing headline. 

However, a month later, to the day, WTI Crude crashed by more than 300% to a negative $37 a barrel on Monday, a day before the WTI Crude May contract expired as traders rushed the exit to avoid owning physical barrels of oil for delivery in May.

In a new research note this week, quoted by Houston Chronicle’s Sergio Chapa, Mizuho’s Sankey said, “This negative price was not a purely paper anomaly.”

“It was the reality of paper markets meeting physical markets, and the last holders of the May contract for crude being unable to get out of their ultimate requirement to take delivery of crude at landlocked Cushing, Oklahoma,” according to Sankey.

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“If you had a stinking barrel of oil in your back yard, would you pay someone $100 a barrel to take it away?” Sankey said. “Yes, and you would probably be relieved you were not charged $300 a barrel. That is the situation we are in, of producers having nowhere to go with the inexorable production that takes weeks and months to reduce to zero,” the expert says, as carried by the Houston Chronicle.

“It’s possible that if current conditions continue, Cushing storage tanks could reach capacity by mid-May,” Wood Mackenzie analysts said on Tuesday.

According to ING strategists Warren Patterson and Wenyu Yao on Tuesday:

“A key question is whether we could see a repeat of this with the June expiry next month. It is likely that storage this time next month will be even more of an issue, given the surplus environment, and so in the absence of a meaningful demand recovery, negative prices could return for June.”

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Don Lapre on April 22 2020 said:
    Can you believe 5 years ago Art Berman predicted the coming of peak oil and now people are paying to have their oil taken off their hands.
  • Clyde Boyd on April 24 2020 said:
    The idea of $100 oil is wishful thinking at best and poor trader market manipulation at worst.

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