Oil returned to its lows with WTI oil touching almost $15 when markets reopened after the weekend. Even though OPEC+ has cut supply by 10 million barrels per day there is still an estimated 15 million barrels per day of oversupply given the huge fall in demand caused by coronavirus induced lock downs.
One point to note here however is that most oil is not transacted at this so called ‘spot’ price as oil is bulky so expensive to store.
As a result, most producers and consumers enter into contracts to buy oil at a specified point in the future for a certain amount. The price of these ‘futures’ have been far more resilient suggesting the near-term weakness is partially technical, caused by expectations that the Cushing storage hub may be close to full capacity, and that demand is expected to increase in time.