- WTI oil fell 3.5%
- Investors turning to longer-dated futures contracts
- Oil industry faces a storage crisis
US oil prices continued to fall on Tuesday as concerns about an oversupply of crude oil continue to grow.
Oil producers facing a problem of lack of storage
On Tuesday WTI oil dropped 3.5% to $12.33 per barrel after US oil benchmark for June delivery dropped around 20% early in the session to around $10. This came at the back of a 25% drop on Monday.
This backdrop comes age the US Oil fund indicated that it is planning to dump WTI contracts for June as well as minimize contracts for the coming months. The investment fund that tracks oil prices indicated that it will be buying long-term contracts. Prices for longer-dated contracts are higher and thus it makes sense for the ETF to prefer long-term future contracts.
The oil industry is facing a shortage of storage facilities for crude oil as producers continue to ramp up production. The coronavirus pandemic has affected global oil demand leaving the industry with surplus oil without room for storage.
Crude oil analysis
Crude oil prices are in line for gains as risk sentiment changes ahead of governments lifting coronavirus-induced lockdowns. Also, the expected April monetary policy meeting from the Fed could improve the sentiment around commodities investment.
Although there are signs of an uptrend in US crude oil prices that could be days away at least until lockdowns are lifted. Support for crude prices could form around Monday’s closing level of $13.21 per barrel with the psychological level being around $10. There is a possibility of more gains to $13.34 per barrels but this could be short-lived.
On the flip side, the prices are looking at April 23, closing of $18.80 as a near term resistance level. This has to be taken back strongly before bulls begin thinking of a long-term downtrend.
Time : 29-04-2020
Pivot : $12.83
Technical View : Long above $13.03
Target : $13.23
Comments : Bullish sentiment ahead of easing COVID-19 lockdowns
Last Price : $12.33