US oil may contract closed at - 37.63 USD / barrel Dow down 2.44percent

category:Finance
 US oil may contract closed at - 37.63 USD / barrel Dow down 2.44percent


*US Senate postpones vote on small business assistance bill

U.S. stocks fell sharply Monday as WTI crude oil futures hit a historic fall in May contracts, while investors were also weighed down by the delay in the trump governments proposed small business rescue loan program.

The S & P 500 fell 51.40 points, or 1.79%, to 2823.16; the NASDAQ fell 89.40 points, or 1.03%, to 8560.73; and the Dow Jones fell 592.10 points, or 2.44%, to 23650.44.

Boeing fell more than 6%, leading the Dow, while Chevron and ExxonMobil fell more than 4%. Energy, real estate and utilities were the worst performers in the S & P 500, each down more than 3%.

The historic decline of USOC also raised investors concerns about the economic slowdown in this quarter. The settlement price of WTI crude oil futures in May fell to - 37.63 US dollars / barrel at the closing on Monday night, a drop of more than 300%. For the first time in history, the closing price was negative, which also means that oil producers would not hesitate to post it to brokers in order to sell crude oil as soon as possible.

The main reason for the collapse of the contract price in May is that the maturity date of the contract is on Tuesday. Most brokers who own the contract have entered the settlement process. In addition to those brokers who have paid a high premium and successfully changed their positions for months, the traders who still hold the contract will enter the real delivery stage. At present, the global crude oil reserves are close to the limit, and crude oil is almost faced with the embarrassment of having nowhere to store. This is almost a devastating blow to the crude oil delivered that month.

If it is not for the smaller losses of WTI crude oil contracts in June and July, the negative impact on oil stocks may be greater. WTI crude oil closed down more than 15.6% at $21.09 a barrel in June, compared with a 6.9% decline in July. If WTI crude oil June contract expires before May 19, the supply and demand situation of crude oil market is still not changed greatly, then investors may face the dilemma of this position change selling or physical delivery.

However, some traders warned that the negative value of the contract in May did not reflect the real situation of the crude oil market. From the price of the futures contract in June maintained above $20 per barrel, it can be seen that the markets expectation of oil price is still relatively stable. The main buyers of WTI crude oil futures contract in May are entities such as refineries or airlines that need actual delivery. However, most parts of the United States are currently blocked due to the epidemic, not only the demand for crude oil has declined, but also the storage space is not enough, so these refineries and airlines are not willing to deliver so many crude oil without place.

At present, there are still a large number of crude oil transported to refineries. The oversupply of crude oil market has not been alleviated in the short term, and the prospect of oil price has become uncertain. Some analysts say that the recovery of gasoline demand will be the key to the recovery of crude oil market. The novel coronavirus pneumonia has severely damaged global economic activity and reduced demand for crude oil. In the report, Royal Bank of Canada pointed out that refiners are refusing to accept crude oil at a historic rate, and as inventories in the United States rapidly rise to the limit, there is little to prevent the crude oil market from further falling in the short term. Although OPEC + finalised a historic production cut earlier this month of 9.7 million barrels a day from May 1, many believe it will not be enough to cope with falling demand.

The International Energy Information Agency (IEA) also warned in its monthly report that global crude oil demand in April may be 29 million barrels per day lower than a year ago, the highest level since 1995.

The real problem of global oil supply and demand imbalance has begun to be reflected in the price, said bjornar tonhaugen, head of crude oil market at rystad energy. Traders who do not want physical delivery will seize the time to exchange contracts for months, and customers who need physical delivery will not accept crude oil beyond their storage capacity. Oil prices will continue to bear pressure next month.

On the other hand, the US Senate delayed the vote on the small business assistance bill, which also hit market sentiment. Senate Republican Leader Mitch McConnell said the Senate is not ready to pass the interim relief bill today, and plans to meet again tomorrow. The Senate will vote as soon as Tuesday afternoon local time.

Europes major stock indexes rallied after earlier losses

European stocks closed slightly higher on Monday, while the pan European Stoxx 600 index closed 0.4% higher, with gains and losses in industry sectors mixed. Healthcare led gains with 1.8% gains, while the automotive sector fell 1%.

Britains FTSE 100 index rose 0.45% to 5812.8, Frances CAC rose 0.65% to 4528.3, and Germanys DAX rose 0.47% to 10675.9.

Hearing aid maker amplifon jumped 11% and healthcare equipment maker Ambu rose nearly 8%. Philips rose more than 6% and expects growth to resume in the second half of the year.

Source: first finance and economics net editor in charge: Yang bin_nf4368