Oil surges 88% in May, posting its best month on record - Business Insider

Oil surges 88% in May, posting its best month on record - Business Insider


Oil surges 88% in May, posting its best month on record - Business Insider

Posted: 29 May 2020 01:06 PM PDT

FILE PHOTO: A 3D printed oil pump jack is seen in front of displayed Opec logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/Illustration/File PhotoReuters

  • WTI crude oil spiked 88% in May, notching its best monthly performance gain on record, according to data from Bloomberg.
  • The surge in oil prices comes just one month after oil prices went negative for a brief period of time, as demand for oil plummeted amid the economic shutdown caused by the COVID-19 pandemic.
  • Fast forward a month later, and signs of bottoming economic data suggest investors are willing to bet that demand for oil will bounce back as well.
  • While crude oil prices surged nearly 90% in May, energy stocks jumped only 2.5% for the month, as measured by the SPDR Select Sector Energy ETF.
  • Visit Business Insider's homepage for more stories.

WTI crude oil spiked 88% in the month of May, marking its best monthly performance on record, according to data from Bloomberg.

The previous monthly record for oil was in September 1990, when the commodity jumped 44.6%, according to Bloomberg.

The surge in oil comes a month after the commodity turned negative for the first time ever, as investors were spooked by a surge in supply and a drop in demand for oil amid the coronavirus pandemic.

Now, investors seem to be betting that demand for oil will bounce back as the economy begins to show initial signs of a recovery.

Despite oil's massive jump in May, the commodity is still down 42% year-to-date.

And while oil surged, energy stocks didn't. 

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Compared to the 88% surge for oil, energy stocks, as represented by the SPDR Select Sector Energy ETF, jumped only 2.5% for the month of May.

The disconnect between the performance of the commodity and the energy stocks may have something to do with the increased balance sheet risks associated with the over-leveraged energy sector.

Crude Oil.JPGMarkets Insider

Oil Now Faces Demand Uncertainty After Record Rebound From Crash - Bloomberg

Posted: 29 May 2020 02:13 PM PDT

[unable to retrieve full-text content]Oil Now Faces Demand Uncertainty After Record Rebound From Crash  Bloomberg

Crude oil prices slide on US-China tensions, doubts about Russian output cuts - Economic Times

Posted: 27 May 2020 09:39 AM PDT

NEW YORK: Oil futures tumbled on Wednesday after US President Donald Trump said he was working on a strong response to China's proposed security law in Hong Kong and as some traders doubted Russia's commitment to deep production cuts.

Many worried that Russia may not agree to extending production cuts ahead of the meeting in less than two weeks between the Organization of the Petroleum Exporting Countries and its allies.

Brent crude fell 91 cents, or 2.5 per cent, to $35.26 a barrel by 12:10 EST (1610 GMT) and US West Texas Intermediate (WTI) crude was down 87 cents, or 2.5 per cent, at $33.48, after falling more than 5 per cent in early trading.

"This is a market that has rallied rather strongly on cohesiveness that has emerged recently from the global oil producers," said John Kilduff, partner at Again Capital LLC in New York.

"There seems to be a crack in the armour there," he added.

The group known as OPEC+ is cutting output by nearly 10 million barrels per day (bpd) in May and June. Some question whether it will continue to do so as demand recovers after many countries ease coronavirus lockdowns.

"Russia appears reluctant to commit to any extensions that might be discussed at next month's meeting," Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.

Gloomy forecasts over the economic impact of the pandemic also weighed on crude.

Economists estimate another 2 million Americans filed initial applications for unemployment insurance last week.

The US Labor Department will report on Thursday. The euro zone economy will probably shrink between 8 per cent and 12 per cent this year, European Central Bank President Christine Lagarde said, warning a the outcome would be between medium and severe.

In another sign of weak fuel demand, Japan's refineries operated at only 56.1 per cent of capacity last week, the lowest since at least 2005.

A London-based trading house bought 250,000 barrels of oil during the historic plunge below $0 and likely.. - Business Insider

Posted: 15 May 2020 05:19 AM PDT

FILE PHOTO: An oil pumpjack operates near Williston, North Dakota January 23, 2015. REUTERS/Andrew CullenReuters

  • BB Energy, an oil trading house based in London, bought 250,0000 barrels of oil when US prices turned negative on April 20, raking in a huge profit, Bloomberg reported on Thursday.
  • BB Energy was one of the few trading houses that had storage capacity when other traders were scrambling for options, allowing it to buy up the historically cheap oil, a source told Bloomberg.
  • The Commodity Futures Trading Commission said on Wednesday that West Texas Intermediate crude for delivery in June could also turn negative upon the contract's expiry.
  • Track the price of oil live on Markets Insider.

One trader bought 250,000 barrels of oil and secured a rare payout as oil prices turned negative last month, causing jitters in markets and leaving most other traders scrambling to find storage options across both sides of the Atlantic, Bloomberg reported on Thursday.

But for BB Energy, a trading house based in London, the historic oil-market crash was a golden opportunity because it had storage capacity when other firms didn't, a source told Bloomberg. BB Energy bought about 10% of all barrels of West Texas Intermediate crude futures for delivery in May.

US oil prices hit an all-time low of negative $37.63 on April 20 because of an extreme shortage of storage options for oil, meaning many traders had to effectively pay others to take the oil off their hands.

It was unclear whether BB Energy was still holding on to the barrels it bought or how much the trading house paid (or, indeed, was paid), Bloomberg said.

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BB Energy says it trades 20 million metric tons of crude and petroleum products annually.

A lack of storage options, particularly at a key facility in Cushing, Oklahoma, and a reduction in demand for the commodity contributed to WTI's historic price crash.

Oil has been ravaged by the coronavirus pandemic, which has all but shut down international travel and greatly reduced manufacturing output, torpedoing demand.

Concerns are mounting that the June WTI contract could follow the same pattern as the May contract, with demand for storage outweighing supply at the expiry of the contract, pushing oil below zero again.

The Commodity Futures Trading Commission, the US commodities regulator, issued a rare advisory on Wednesday urging market participants to prepare for a repeat scenario of negative prices for the June WTI contract.

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"We note that we are issuing this advisory in the wake of unusually high volatility and negative pricing experienced in the May 2020 West Texas Intermediate (WTI), Light Sweet Crude Oil Futures contract on April 20 (the penultimate day of trading and expiration of the contract)," it said.

On Wednesday, OPEC downgraded its demand forecast by a third, saying it expects demand to fall by just over 9 million barrels per day in 2020. OPEC had previously forecast a slump of 6.84 million barrels per day.

WTI crude was trading at about $26.62, up 4.3%, on Thursday morning. Brent crude, the international benchmark, was at $30.36 a barrel, up 2.9%, as of 6:20 a.m. ET.

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