OIL FUTURES: WTI tests $20/b as pandemic-weakened demand outlooks dim

New York —
NYMEX WTI futures were testing the $20/b level soon after the start of trading Sunday evening as demand outlooks dimmed amid further intensification of to COVID-19 pandemic despite stepped-up global containment efforts.

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At 2230 GMT ICE May Brent was $1.72 lower at $23.21/b and NYMEX May WTI was down $1.46 at $20.05/b. The May WTI contract briefly traded as low as $19.92/b.

Global crude demand is forecast to contract 4.5 million b/.d in 2020, according to the latest S&P Global Platts Analytics monthly forecast released Friday.

In the US, governments are increasing steps to limit the outbreak, weighing on oil demand. Total cases in the US have topped 137,000 as of late Sunday, according to Johns Hopkins University data.

The US Centers for Disease Control and Prevention issued a travel advisory for New York, New Jersey, and Connecticut urging residents to refrain from non-essential travel for 14 days. The move came after US President Donald Trump said on Twitter Saturday that he was considering a quarantine for certain “hot spots” in the region.

At least 26 US states have issued blanket stay-at-home orders, and partial orders are present in at least 13 others, according to media reports. In sum, at least 229 million people are facing government requests that non-essential workers remain home.

Dr. Anthony Fauci, a member of the White House coronavirus taskforce, in an interview with CNN on Sunday said the pandemic may claim 100,000-200,000 lives in the US.

S&P Global Platts Analytics’ most recent coronavirus pandemic demand case projects US gasoline demand to drop a massive 2.3 million b/d year on year in the second quarter.

Crude oil in the Permian Basin fell sharply Friday as refining demand destruction and the appeal to store crude in a contango market pushed outright pricing to levels not seen since the late 1990s.

May barrels of West Texas Sour (WTS) were heard trading Friday at a $10.50/b discount to the NYMEX Light Sweet Crude contract (WTI cash). S&P Global Platts has not assessed the WTS differential lower since September 2018, when it was at WTI minus $11.05/b.

WTI in Midland also fell and was heard trading Friday as weak as an $8/b discount to cash WTI. That would put outright values for WTI in the $13-$14/b range, levels that have not been recorded since early 1999.

At those price levels, “producers are going to start shutting in wells,” said Bob Williams, director of content for energy consultancy Enverus.

“That’s going to be an added expense nobody needs,” he said.

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