- WTI remains on the offer as analyst reiterate that the market is oversupplied.
- The number of active US oil rigs fall for the sixth straight week.
Oil has begun the final week of April on a negative note, falling over 5% during Monday’s session on persistent oversupply concerns.
A barrel of West Texas Intermediate (WTI), the North American benchmark, is changing hands near $15.50, representing a 5.85% drop on the day.
The black gold has come under pressure with analysts warning of another “Monday massacre” on the back of declining global crude storage capacity.
“Commodities are spot assets, not anticipatory assets and must clear current supply and demand, which still remain extremely out of balance in all markets,” said Goldman’s chief commodity strategist Jeffrey Currie.
Moreover, supply still remains greater than demand despite the 74% year-to-date drop in prices. As a result, prospects of a sustainable price recovery look weak, unless US shale output drops drastically in the coming days.
The price drop is forcing US producers to cut output. For instance, Baker Hughes’ data released on Friday showed that the number of active US oil rigs dropped by 60 to 378 last week, marking a sixth straight weekly decline. The output, however, needs to drop at a faster rate to compensate for the massive demand destruction brought on by the coronavirus outbreak.
Oil prices came under pressure last week with the now-expired May Nymex contract falling to $37 below zero for the first time ever, as sellers paid buyers to take crude off their hands, as noted by MarketWatch.