Well, now we all know how it feels when the bottom falls out. In fact, it seems there is no bottom, with WTI crude at Cushing settling on Wednesday at $20.37/bbl, down $6.58/bbl. There is no point in belaboring the sad story here. You can read about pandemics, OPEC price wars and collapsed markets in every periodical on the planet. Likewise, there is no point in trying to predict what will happen next. Any pundit who tries to predict future prices in this environment is picking numbers out of the air at best. But at RBN, we are energy market analysts. As such, we are compelled to analyze something. And in these market conditions, there is one thing we can hang our hat on: No matter how bad things get, hope springs eternal. Thus, the market consensus is that things will be better a year from now, and even better a year after that. The implication? In a flash, crude is in steep contango, and that has repercussions for pipeline flows, regional price differentials and for storage — in production areas, at refineries, in VLCCs on the water, and especially at Cushing, OK, the king of oil storage hubs. Today, we examine one aspect of the chaos that now envelopes all aspects of energy markets.
Seventeen days ago — eons in COVID-19 time — we noted in Free Fallin’ that CME/NYMEX WTI Cushing crude oil for April 2020 delivery had closed at $44.76/bbl, a decline of more than $16/bbl, or about 27%, since New Year’s Day. Well, prices have done a lot more free-falling since then. Figure 1 puts the earlier decline and more recent nosedive in historical context, showing daily WTI front-month futures prices since 1998.
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