Oil Price Fundamental Daily Forecast – Late Session Sell-off Sinks Prices; US Producers Shed 19 Rigs

Oil Price Fundamental Daily Forecast – Late Session Sell-off Sinks Prices; US Producers Shed 19 Rigs thumbnail
U.S. West Texas International and international-benchmark Brent crude oil finished sharply lower on Friday, nearly erasing all of the previous session’s record one day gains. Most of losses occurred during the last half-hour of trading when prices plunged $4.00 as the April U.S. futures contract expired. On Thursday, April U.S. crude futures jumped so much…

U.S. West Texas International and international-benchmark Brent crude oil finished sharply lower on Friday, nearly erasing all of the previous session’s record one day gains. Most of losses occurred during the last half-hour of trading when prices plunged $4.00 as the April U.S. futures contract expired. On Thursday, April U.S. crude futures jumped so much late in the day that trading had to be automatically halted for two minutes of post-settlement trade due to a built-in circuit breaker designed to curb volatility.
On Friday, May WTI crude oil futures settled at $22.63, down $3.18 or -12.32% and June Brent crude oil finished at $29.00, down $1.30 or -4.48%.
The price action continued to be controlled by the double-whammy of lower demand due to the coronavirus’ effect on the global economy and the threat of oversupply as Saudi Arabia and Russia engage in a price war to gain the majority of market share. Helping to keep a lid on prices are expectations of as much as 4 million barrels of crude being dumped on the market after April 1.
Speculators Increased Long Positions, but Could Be Trapped
Speculators increased their long positions in the period up to Tuesday, according to the Commodity Futures Trading Commission (CFTC), even as prices plunged.
“The speculative community rode their position into the close, and it’s a difficult position to exit at the end of the day and at the end of the contract’s life,” said Bob Yawger, director of energy futures at Mizuho. “They should get out when it turns red. They sit there hoping it goes back to green, and instead the market gets pummeled by consecutive waves of bad news and they’re paralyzed.”
Speculators rode Thursday’s record one-day rally, hoping for a follow-through move, which never occurred. With many holding losing positions over the weekend, they may be forced to liquidate at highly unfavorable prices if pressured to sell-out of these positions on Monday morning.
US Rig Count Drops by 19
Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil fell by 19 to 664 the week-ending March 20. That followed only minor changes in the past few weeks.
The total active U.S. rig count, meanwhile, also declined by 20 to 772, according to Baker-Hughes.
U.S. operators have shed 33 rigs in 2020, after an already steep drop off in activity in 2019. Last year, the rig count dropped by more than 25 percent. A year ago this week, there were 1,016 operating oil and gas rigs in the U.S.

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