By Barani Krishnan
Investing.com - Determined not to allow the horrors of sub-zero pricing from last month’s spot contract expiry revisit them, bulls in U.S. crude drove the current June futures to above $30 per barrel on Monday, well before the new front-month, July, comes into force Wednesday.
“Without skin in the game, it is difficult to predict the WTI expiry, but the financial (Open Interest) and fundamental (declining Cushing stocks) look healthier for this expiry,” said Olivier Jakob, founder of the PetroMatrix oil risk consultancy in Zug, Switzerland.
The June contract for New York-traded West Texas Intermediate crude, which expires Tuesday, settled up $2.39, or 8.1%, at $31.82 per barrel.
July WTI, which Investing.com is already quoting for spot-month activity due to the huge shift in volume there ahead of Tuesday’s roll-over, settled up $2.13, or 7.2%, at $31.65.
June WTI’s premium over July also meant that there was no longer an incentive for traders to buy oil now and store to sell later at a better price. Such an incentive, known in the oil market as contango, had weighed heavily on the front-month of U.S. crude during the height of the coronavirus pandemic when millions of barrels of demand for oil was lost overnight. Exactly a month ago, WTI’s previous contract, May, fell to minus $37 a barrel, blowing out its contango to the successive month.
Monday’s open interest in WTI July, as alluded to by Petromatrix’s Jakob, was at 308,328 contracts versus the 248,158 for WTI August — making risk-taking in the upcoming front-month still sound.
Adding to WTI’s upside, Seevol.com reported a 5.5 million drop in crude stockpiles last week at the Cushing, Ok. holding center for oil delivered against expiring contracts of the U.S. benchmark. That came on top of the previous week’s decline of 3 million barrels.
Cushing stockpiles were growing as fast as 5 million barrels per week through April, triggering speculation that the 76-million-barrel capacity hub will run out of space before the end of this month. Fears of a Cushing max-out were among factors that drove WTI futures to last month’s negative pricing.
Brent, the London-traded global benchmark for oil, settled up $2.31, or 7%, at $34.87.