US oil sinks towards USD10 as fund sells off holdings

US oil nosedived towards USD10 a barrel Tuesday after a major exchange-traded fund started selling its short-term contracts of the commodity, and storage concerns mounted as the coronavirus strangled demand.

In morning London deals, West Texas Intermediate crude for June delivery tumbled more than 21 percent to USD10.07 — having plunged 25 percent a day earlier.

International benchmark Brent crude slid 4.9 percent to trade at USD19.01 a barrel.
The latest market drop was driven by the United States Oil Fund — a massive, oil-backed exchange-traded fund (ETF) — saying it would sell all its holdings in the contract for June delivery.

By investing in longer-dated contacts, the fund’s move put pressure on the June contract, analysts said.

The move highlighted continued concerns that storage is filling up and that when futures contracts do expire, buyers may find there is little space to put the oil they have purchased.

“Oil is back in focus, with the June WTI contract plunging again as the largest US oil ETF plans to offload all of its holdings of the contract in the coming days and instead buy up longer dated contracts,” OANDA analyst Craig Erlam told AFP.

“I am sure they are not the only ones that have learned the lessons of last week and opted to avoid another episode in the coming weeks.

“This certainly puts downside pressure on prices in the near-term though as traders look to get in ahead of the fund and avoid heavy losses of their own.”

Demand for the commodity has collapsed owing to lockdowns and travel restrictions imposed worldwide to fight the virus.

WTI tanked below zero for the first time last week, hitting a low of minus USD40.32 per barrel on April 20 as investors scrambled to offload it before the expiry of the May contract — but could not readily find buyers with sufficient places to store crude.

Oil storage concerns have overshadowed signs that some countries are starting to slash production in line with a major agreement hammered out this month.

Top producers have agreed to reduce output by 10 million barrels a day from May to shore up markets, a deal that marked an end to a price war between Russia and Saudi Arabia.

Prices have won back ground since falling into negative territory last week, but remain at their lowest levels in years. -AFP


Please enter your comment!
Please enter your name here

Latest News

CIMB to continue repayment assistance programme

CIMB Bank Berhad and CIMB Islamic Bank Berhad has announced that its repayment assistance programme continues to be made available, to allow...

Gamuda Land launches digital gallery, Gamuda Land Virtual Experiential Gallery

Gamuda Land has launched its innovative digital gallery, Gamuda Land Virtual Experiential Gallery. The gallery is built entirely on a virtual reality...

Malaysia needs to brand its startup ecosystem as one of world’s best, says KJ

Khairy Jamaluddin, Minister of Science, Technology and Innovation, said the country’s entrepreneurship ecosystem was on par with the world’s best, but Malaysia...

Malaysian organisations to invest more in multi-cloud management, reveals IBV survey

Based on the IBM Institute for Business Value (IBV) survey, business executives in Malaysia are increasingly planning to invest in hybrid multi-cloud...

ACO Group registers RM26.8 million in revenue during 2QFY2021

ACO Group Berhad, a distributor of electrical products and accessories, has announced its second quarter (“2QFY2021”) and 6 months financial results for...

Must read

How today’s technology is key to industrial and manufacturing sector business continuity in a post-Covid-19 world

By  Dr. Ravi Gopinath, Chief Product Officer AVEVA , How the world does business was changing before the outbreak...

Prioritising digital resiliency in the road to recovery

By Maria Dzhanan, Vice President, Oracle Digital, JAPAC With sixty-one percent of small and medium businesses (SMBs) in Asia Pacific...

Is WFH Stifling Innovation?

Many companies are adopting ‘work from home’ models for employees following their success during COVID-19. The pandemic-induced economic downturn may not necessarily...

Agricultural industrialisation as key to food safety, security & sovereignty

By Jason Loh, Emir Research’s Q3 2020 Focus Group Discussion (FGD) findings has highlighted concerns over food safety, security...