Oil Climbs As Fears Of Negative Prices Fade
Trader anxiety has earned a reprieve, with oil markets dodging one of many bullets after a key U.S. benchmark oil futures contract avoided a repeat of the April fiasco that saw oil futures land in negative territory.
West Texas Intermediate (WTI) crude prices settled higher on Tuesday, finishing the day in backwardation and allaying fears that oil prices could slip into negative territory once again.
The June WTI Nymex contract finished higher than the front-month July contract, marking the first time in months that the market shifted from contango to backwardation.
he WTI June contract, which expired at the end of the session, was settled at $32.50/barrel vs. $31.96 for the July contract after gaining 8.1% on Monday and another 2.1% on Tuesday.
Meanwhile, the July contract, which is the most actively traded, rallied 7.2% on Monday and 1% on Tuesday.
The developments are a welcome bullish signal that the formidable headwinds of a massive supply glut, lackluster demand, and limited storage facing the crude oil markets could be easing.
Tyler Richey, co-editor at Sevens Report Research, has told MarketWatch that the move to backwardation shows that “… there’s strong demand for physical crude as well as available storage to take delivery”.
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