June WTI rises over 4% in Asia

WTI rebounds in Asia, but gains may be short-lived.
Goldman Sachs thinks a sizeable reduction in output is needed to rebalance the market.

Omkar Godbole FXStreet Contributor

Oil prices rebounded on Tuesday, with West Texas Intermediate's (WTI) June contract rising over 4% and printing session highs above $22.50.

The May expiry contract rose above $1 per barrel, having settled at -37.63 on Monday. Prices fell below zero on the first trading day of the week, highlighting oversupply concerns. The May contract will expire today.

The bounce seen in the contract expiring in June could be short-lived, as the oversupply concerns are unlikely to ease anytime soon. "Physical reality of still massively oversupplied oil market will likely exert downward pressure on June WTI contract," said analysts at Goldman Sachs, according to Reuters.

More than 55% of the total US crude storage was full as of April 10, while inventory at the Key Cushing, Oklahoma hub was 69% full, according to Argus Media, provider of energy and commodity price benchmarks.

Storage capacities are getting full as the coronavirus pandemic has brought unprecedented demand destruction. Major producers led by Russia and Saudi Arabia recently announced a deal to cut output by 9.7 million barrels per day. So far, however, that has failed to put a floor under prices.

Goldman Sachs analysts are of the opinion that production needs to fall sizeably to bring markets into balance as only a finite amount of storage is left to fill.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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