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US Crude Snaps Winning Streak, Slides 5% on Tightening Storage Capacity

May 6, 2020 at 17:09 by Andrew Moran

Crude oil futures are poised to snap their five-session winning streak midweek on fears over tightening storage capacity levels. Prices did limit their losses on falling US, as well as a smaller-than-expected jump in domestic inventories. Is the worst over or should the market prepare for more bleeding?

June West Texas Intermediate (WTI) crude oil futures tumbled $1.28, or 5.21%, to $23.28 per barrel at 16:53 GMT on Wednesday on the New York Mercantile Exchange. Oil prices have surged 52% over the last week, paring their year-to-date declines to below 62%.

Brent, the international benchmark for oil prices, is also slumping in the middle of the trading week. July Brent crude futures shed $2.00, or 6.46%, to $28.97 a barrel on London’s ICE Futures exchange. Brent is up 25% in the last five sessions, but it is still down 56% so far this year.

According to the US Energy Information Administration (EIA), domestic crude supplies climbed 4.6 million barrels for the week ending May 1. This is below the median estimate of 7.8 million barrels. Crude stockpiles at the Cushion, Oklahoma storage facility surged two million barrels. US crude output decreased 200,000 barrels per day (bpd) to 11.9 million bpd.

Distillate inventories surged 9.5 million barrels, while gasoline stocks decreased 3.2 million barrels. Refinery crude runs jumped by 215,000 bpd as utilization rates climbed by 0.9% to 70.5% of capacity.

The Baker Hughes total oil rig count came in at 325, down 378 from the week before.

The crude rally has been supported by investors’ hope of recovering demand as more jurisdictions – in the US and abroad – gradually reopen their economies. But industry observers are cautioning that the supply glut is still immense and storage stocks are nearing full capacity.

Although members agreed to slash output by 9.7 million bpd in May, Organization of the Petroleum Exporting Countries (OPEC) production soared 30.79 million bpd in April. This is the highest it has been since February 2019 and it was up 1.82 million bpd from March.

In other energy commodities, July natural gas futures plunged $0.166, or 7.78%, to $1.968 per million British thermal units (btu). June gasoline futures slipped $0.0463, or 5.14%, to $0.855 a gallon. June heating oil futures crashed $0.09, or 10.04%, to $0.8066 per gallon.

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