Updated 11.15am: More than just a rollover issue? Oil markets are in turmoil again today as both Brent and WTI contracts come under severe pressure, with volatility extremely elevated.
Severe dislocation in the May contract is spilling over into future months with the benchmark June WTI contract tumbling 40 per cent or so to take an $11 handle at one point this morning. It’s rebounded very sharply back to $16.50. July remains firmer above $20. Whilst the May contract went absurdly low because traders had to avoid taking physical delivery at all costs, the forward contracts look too high when you consider how much demand destruction is out there. If this super contango market persists we may see further implosions like we saw yesterday as we approach settlement as traders are caught the wrong side of the expiry with nowhere to put it.
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