Oil storage facilities in US filling up

Bloomberg/Fuel Fix:
The U.S. oil market is displaying worries that stockpiles are going to run out of storage space, with futures being whipsawed as a growing glut counters economic stimulus measures.

While crude in New York rose for a third day as the U.S. made progress on an economic aid package, the so-called WTI cash roll traded down at the lowest level since December 2008 on expectations that inventories at the delivery point for U.S. futures would balloon in coming weeks and months. Gauges of the physical market for actual barrels of crude are also pointing to weakness.

The WTI cash roll, which traded down to -$6.50 a barrel Wednesday, allows traders to push long positions forward to later months or cover short positions in the three days following the expiration of the prompt New York Mercantile Exchange futures contract.

“Investors are still grappling with the magnitude of decreased demand,” said Nick Holmes, portfolio manager at Tortoise. “Combine that with more supply hitting the market, it creates severe dislocations across oil markets. There’s a lot of uncertainty about how long demand will be depressed and at what levels.”

As the coronavirus pandemic locks down swathes of the world, concern over the hit to consumption is mounting. The head of Vitol Group warned demand is decreasing and will shrink further as India enters a lockdown.
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President Trump appears determined to reopen America to business in areas outside of the hotspots of the Coronavirus.  Most of those hotspots are in areas there were already reduced fuel usages such as congested areas in New York and California.  I suspect rural areas in Texas and the Midwest will soon return to some semblance of normal usage.

The pressure to keep things shut down is coming from the left in this country which sees political advantage in prolonging the restrictions on movement.  The US is also putting pressure on the Saudis to cutback their overproduction in their spat with Russia over price maintenance moves.

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