Oil futures on Friday finished higher for a third straight session, but U.S. prices posted a record weekly loss of more than 32%, as commodity investors attempted to take stock of a historic collapse in prices that cast a spotlight on problems of oversupply and dwindling storage in the energy complex.
After the now-expired May Nymex contract on Monday fell into negative territory for the first time ever, meaning that sellers had to pay buyers to take crude off their hands, market participants have been struggling to manage the unprecedented volatility.
“Any meaningful recovery in oil prices is unlikely to last after the utter chaos witnessed earlier this week,” said Lukman Otunuga, senior research analyst at FXTM. “Oil weakness is set to remain a major theme in Q2 given the overwhelming drop in demand, fears around slowing global growth and lack of storage space.”
“At this point, anything and everything is on the cards for both WTI & Brent, and this sentiment will most likely be reflected in price action moving forward,” he told MarketWatch.
June West Texas Intermediate crude
Gains on Friday marked a third straight advance for the international and U.S. grade oils—the longest such streak of gains since a similar stretch ended March 25.
Despite those outsize gains, WTI still saw a 32.3% decline for the week, based on the June contract. That was the biggest weekly percentage loss on record, according to Dow Jones Market Data.
June Brent crude
Some producers in the U.S. are cutting production while other participants have said they would aim to cut output ahead of a May 1 deadline to enact global reductions under a historic pact forged by the Organization of the Petroleum Exporting Countries and allies including Russia, a group collectively known as OPEC+.
Kuwait on Thursday, for example, said it would consider trimming its production early, according to Reuters, citing the country’s new agency KUNA.
Meanwhile, Continental Resources Inc.
It is unclear what effect declines in output will have in balancing the massive oversupply of crude and the lack of storage facilities which has pressured the energy industry.
“As we see it, a wave of shut-ins is inevitable for the oil market to come closer to a balance,” wrote Bjornar Tonhaugen, head of oil markets at Rystad Energy in a daily research note.
“Not having enough storage is not only a theoretical problem but a practical one too. Unless more production shuts down, the extracted oil will literally have nowhere else to be stored. Which implies a forced shutdown across several locations,” the analysts wrote.
Moves on the day come after the World Bank cut its outlook for crude prices to an average at $35 barrels a year for 2020, down from its 2019 average, pointing to overproduction.
“The downward revision reflects an historically large drop in demand,” the World Bank said in a news release.
Also on Nymex Friday, May gasoline
May natural gas