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James Hyerczyk

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Tuesday after yesterday’s steep decline. Brent crude oil is the weaker of the two markets because of expectations of lower demand in Europe and Asia. The spread between the markets has tightened to its lowest level since 2016. On Monday, Brent hit a new multi-year low, while WTI stopped just short of its multi-year low reached last week.

At 11:14 GMT, May WTI crude oil is trading $29.72, up $0.72 or +2.45% and June Brent crude oil is at $32.06, up $0.37 or +1.20%.

The catalysts weighing on crude oil prices remain the price war between Saudi Arabia and Russia and fears of a global recession. Perhaps helping to underpin prices are massive stimulus efforts from the U.S. Federal Reserve and speculation that the U.S. government will hit the economy in spectacular fashion with an equally massive fiscal effort of its own. Countries loading up on crude for their strategic reserves is also helping to underpin prices.

Oil Plunge Sets Off Search for Tanks, Revives Dormant Cushing Storage Trade

Reuters reported on Tuesday that rates to store oil at one of the world’s biggest trading hubs are surging, as traders globally scramble to secure space in tanks to cope with slumping demand from the coronavirus outbreak and a flood of supply from the Saudi-Russia price war.

The need for a place to park all that surplus is breathing new life into the market at Cushing, Oklahoma, the nation’s hub for trading of billions of dollars of crude a day and the town that bills itself “the pipeline crossroads of the world,” Reuters reported.

Analysts estimate the glut could reach more than 1 billion barrels. Some of the excess crude will be absorbed by nations snapping up cheap oil for their strategic reserves, including India and the United States, but that will only mop up some of the supply, Reuters said.

Storage rates at Cushing, doubled over the past month, and were seen as high as about 50 cents per barrel per month by Friday, two trader’s familiar with the matter said. Storage for about 540,000 barrels at Plains All American’s Cushing tanks for sublease was offered at 50 cents per barrel (cpb) for a term of one year, one source said.

The United State currently has more than 450 million barrels in crude storage, not including strategic reserves. The drop in prices has sparked numerous storage inquiries, particularly at Cushing, the delivery point for benchmark U.S. crude futures.

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