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Petroleum industry

U.S. Crude Oil Prices Plummet as Storage Levels Rise

Strategic Insights

— 1 min read

U.S. crude oil prices continued to slide on Thursday as oversupply issues led to a widening of the contango, a situation where forward-month prices are higher than front-month prices. The May/June spread reached a 10-year high, causing traders to cash in on the difference between cash and futures markets. As a result, the price of June light, sweet crude futures dropped 35 cents to end the day at $15.19/bbl.

Key Takeaways:

  • The contango reached a 10-year high, with the May/June spread widening to $1.85/bbl, and later to $2.25.
  • 3.854 million bbl of crude will be delivered against the May Nymex contract, with 3.614 million bbl being foreign crude that has been in storage since March.
  • A further 4.5 million bbl of foreign crude is in storage in Cushing, Okla., for delivery at a later date.
  • Traders are profiting from delivering crude against the Nymex contract due to the steep contango.
  • The May gasoline contract ended the day down 0.32 cents at 50.29 cents/gallon, while May heating oil surrendered 0.22 cents to end the day at 42.84 cents/gallon.
  • The Nymex Henry Hub gas futures contract for May delivery fell 7 cents to settle at $2.328/MMBtu.
  • Spot prices for liquefied petroleum gas (LPG) and methyl tertiary butyl ether (MTBE) were affected by the broader market trend.

Statistics:

  • The May/June contango spread reached $1.85/bbl and later $2.25.
  • 3.854 million bbl of crude will be delivered against the May Nymex contract on Thursday.
  • 4.5 million bbl of foreign crude is in storage in Cushing, Okla., for delivery at a later date.
  • The Nymex Henry Hub gas futures contract for May delivery fell 7 cents to $2.328/MMBtu.
  • Spot prices for liquefied petroleum gas (LPG) fell 15-20 cents in Louisiana and South Texas.

Sources:

  • "Traders cash in on massive contango between May and June." (Source not provided)
  • "Nymex: May crude contract to deliver 3.854 million bbl on Thursday." (Source not provided)
  • "Cushing storage: 4.5 million bbl of foreign crude waiting delivery." (Source: TOD, 3-16-98, p.4)
  • "LPG spot prices fall 15-20 cents in Louisiana and South Texas." (Source not provided)

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