Persistent Pandemic Dials Down Oil Demand Optimism

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Oil futures retreated on Tuesday against the backdrop of a sell-off in equities, a strengthening dollar and a surge in Covid-19 cases in key energy demand centers. Oil had been trading at one-month highs early in the session, drawing some support from Libya’s declaration of force majeure at its Hariga port (IOD Apr.20'21). But benchmark prices tanked into negative territory on news hit of heightening pandemic woes in India. A state of emergency was also declared in Tokyo, which is struggling with another wave of Covid-19 infections as it ramps up preparations for the summer Olympics. In London, Brent crude for June delivery shed 48¢ to end at $66.57 per barrel, while in New York, the May contract for West Texas Intermediate (WTI) on Nymex expired at $62.44/bbl, down 96¢ on the session. The more heavily traded June contract, now the front-month for WTI, fell 76¢ to $62.67/bbl. Interestingly, the front of the WTI curve, like Brent, is now in backwardation, a price structure denoting that prompt oil is more expensive than later volumes, but the spread with the July contract is only 7¢. If market behavior in previous months is any indicator, the June/July spread could soon flip into contango, which means the June contract will be cheaper than July -- a sign of a well-supplied market (OD Apr.9'21). Covid-19 Returns

Oil Demand, Oil Inventories, Oil Supply, Crude Oil
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