Yahoo Finance Day Two of U.S. Oil Horror; June Takes a Hit as Texas Refuses Cuts
By Barani Krishnan
Investing.com - With the speculative crowd moving out of U.S. crude’s expiring spot month, the battered May contract rose from the depths of negative pricing on Tuesday. But bears turned their attention instead to the successive front-month, June, mauling it on news that the state of Texas won’t cut output yet despite immense supply glut and scarce storage for oil.
The Railroad Commission of Texas, which oversees oil and gas companies, delayed a vote on controversial production cuts demanded by midsized shale oil drillers such as Parsley Energy (NYSE:PE) and Pioneer Natural Resources (NYSE:PXD) but opposed by big energy firms such as ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX) and Marathon Oil (NYSE:MRO). The commission wanted input from the state's attorney general.
Oil bears, riding on the fever-pitch negative sentiment in crude since Monday’s historic subzero prices, pounded the West Texas Intermediate’s June contract by 54%, or $11.30, to $9.15 per barrel by 1:58 PM ET (17:58 GMT).
WTI May, which plunged $55.90 to settle at minus $37.63 on Monday, rose from those depths to trade at more than $7 in the final hour to its expiry.
Brent, the London-traded global benchmark for crude, meanwhile, fell 26%, or $6.77, to $18.80, as the players tried to ensure to keep its differential to June WTI within the typical $10 band.
Analysts said the events in oil over the past 24 hours have made pricing energy risk virtually impossible.
“Allowing negative prices means no downside limits, and that makes it now more difficult to assess risk exposure from flat price to cracks and spreads,” said Olivier Jakob, founder of the PetroMatrix oil risk consultancy in Zug, Switzerland. “Technical targets are also hard to set in this environment.”
President Donald Trump, seemingly aware of market rumblings predicting the death of the U.S. shale oil which made America the world’s top crude producer, vowed not to let the industry die.
“We will never let the great U.S. Oil&Gas Industry down,” Trump tweeted “I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!”
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