May Oil Contract Falls Ahead Of Settlement Date While June Contract Trades At $25

Oil Video 17.04.20.

Huge Spread Between May 2020 Contract And June 2020 Contract

The May 2020 contract settlement date is April 21, 2020, and many charting platforms have already started to show the June 2020 contract, whose settlement date is May 19, 2020.

As a result, some investors and traders may get confused – the May 2020 oil contract trades at roughly $18 after failing to hang on to the $20 level, while the June 2020 contract is valued at about $25.

Under normal conditions, you won’t see such a huge spread between May and June contracts, but the current situation is anything but normal. U.S. is going through the acute phase of the crisis so it’s no surprise that the near-term contract for WTI oil gets hit the most.

Pricing for June 2020 contract shows that market participants hope that the situation will get better in May due to oil price cuts and the reopening of the economy.

It remains to be seen whether these expectations are correct since the market will have to deal with very material crude stocks which will increase through April and will continue to increase in May.

Perhaps, the U.S. will improve the situation by paying oil companies for leaving oil in the ground, but this idea only exists as a plan at this time.

Is Donald Trump’s Plan To Reopen The Economy Bullish For WTI Oil?

The current plan to reopen the U.S. economy implies that the business activity will get back to normal in three stages. The reopening process will done on a state-by-state basis.

To get to the first stage, a state will have to show decline in coronavirus cases for a period of fourteen days. The consequent stages will be dependent on the success of the previous ones.

In short, there will be no immediate return “back to normal” on May 1 – the process will be gradual even in the least affected states. These measures are necessary to prevent a devastating second wave of infections, but they do not bode well for a speedy recovery of oil demand.

The same process, with variations, will be seen in all countries that were severely hit by coronavirus. In my opinion, the near-term picture for oil demand continues to look bleak, and I won’t rule out a move to $20 from the June 2020 contract.