Oil: Prices likely to remain suppressed – OCBC

April’s negative prices  were a result of the market being caught unaware on both the fund flows and physical buying fronts, both of which are unlikely to happen simultaneously again, in the opinion of Howie Lee from OCBC Bank.

Key quotes

“The probability to see negative prices rear its head again this month is much lower than what we had witnessed in April. The USO now has the mandate to spread its holdings from mostly holding front-month contracts to front, second and third-month contracts in the proportion 55%- 45%-5%, which should greatly reduce rollover pressures.” 

“Physical buyers should be much more aware of the storage issues in Cushing after last month’s fiasco and are likely to attempt any rollover much earlier.” 

“Prices are highly likely to remain suppressed and face selling pressure in the short-term, especially with the storage issues still persisting.”