[This is the sheer idiocy of any form of lockdown. It appears to me that a push back against lockdown is starting, even in South Africa. The sooner people push back, the better. That way the damage inflicted by the Jewish malicious insanity can stop. Jan]
Oil futures slid into negative territory for the first time ever on Monday, and Jeff Currie, global head of commodities research at Goldman Sachs, sees volatility staying strong until mid-May.
Shutting a well down is expensive and can damage infrastructure, Currie told CNBC on Monday, delaying the supply cuts needed to stabilise oil prices.
Production cuts announced at the mid-April OPEC meeting were simply voluntary, whereas US producers now face "necessary cuts forced on the market by economics," he added.
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WTI crude oil contracts for May delivery slid into negative prices on Monday amid an unprecedented supply glut. Traders are in effect paying others to take the oil, as storage space in the US runs out. WTI is the benchmark for US oil prices.
Goldman Sachs’ commodities expert thinks stabilisation is weeks away.
May delivery contracts expire on Tuesday, leaving traders paying buyers to avoid taking delivery of thousands of barrels of oil themselves. The market strain remains on the supply side, Jeff Currie, global head of commodities research at Goldman, told CNBC on Monday, yet producers face major risk in slowing down their businesses.
"Shutting down a well is extremely expensive, and sometimes you damage the well forever," Currie said.
Oil firms are then forced to pay others to keep their wells running, beginning a chain of unconventional transactions as parties offer barrels at negative prices to get them off their hands.
Wells in the US Gulf Coast regions will eventually step in to shut down pumping activity, Currie said, but until they slash supply, near-term oil futures remain under fire.
"We don’t think this is the end of it. You’re likely to see this continue to go on at least through the middle of May," he said.
The historic market slump will likely bring the logical next step in aiding oil markets, the commodity head said. OPEC production cuts agreed to on April 12 brought peace to a monthslong price war between Russia and Saudi Arabia, and aimed to lift the battered market by curbing supply.
The commodity staged a brief recovery after the coalition meeting, but the voluntary cuts weren’t enough to stabilize prices. Producers are now weighing "necessary cuts forced on the market by economics," Currie said. Logistical issues related to oil transportation and uncoordinated shutdowns will drive volatility for weeks before the supply shortage abates, he added.
WTI crude futures closed at -$38.45 per barrel on Monday.
Brent oil – the benchmark used by South Africa, Europe and the rest of the world – fell by "only" 9% to $25 a barrel. Brent has not been hit as hard because – unlike the US – there is still storage space to cope with the excess oil. Brent futures are also already trading for delivery in June, not next month, unlike the WTI May futures.