Final word on April 2020 negative oil price unspoken

Market: Crude oil
19/04/21

Oil producers and refiners are on a stronger footing as they approach tomorrow's one-year anniversary of US crude benchmark WTI plummeting to negative $37.63/bl.

But the industry still lacks definitive answers on the root cause of the precipitous market slide. For an industry numbed to boom-and-bust cycles, the benchmark's plunge on 20 April 2020 shocked traders and shifted fortunes. Shale producers reluctant to shut in wells with prices near $20/bl for the first time were in the position of paying someone to take their oil. Retail investors betting on a rebound in oil prices were wiped out or faced large losses, such as exchange-traded US Oil Fund's annual return of negative 68pc. The price crash set off a scramble by former US president Donald Trump to rescue the industry, even considering trying to send cash to struggling oil firms by buying unproduced reserves and counting them as part of the US Strategic Petroleum Reserve.

As the one-year anniversary nears, the WTI contract is trading at roughly $100/bl more than the lowest price in the final minutes of trading on 20 April 2020. Producers and service contractors are rehiring on expectations those crude prices will be sustained, as faster-than-expected Covid-19 vaccinations support recovering fuel demand and supply remains tight. But the rosier outlook for producers and refiners does not diminish the possibility that another black swan event could lead to similarly turbulent market conditions.

Oil producers have not forgotten the sting of negative prices but cannot afford to dwell on what they hope will be a one-off event.

"Everyone has moved on, just because you have to," independent producers group DEPA president Jerry Simmons says.

Some operators seeking to limit exposure to the landlocked Cushing trading hub turned to different benchmarks, such as the American GulfCoast Select, which reflects prices across Houston hubs and the waterborne market.

Collapsed, then expired

The price of the May 2020 contract for WTI collapsed a day before expiry, as traders were running out of spare storage capacity to deliver crude in Cushing, Oklahoma. That coincided with an incoming surge of waterborne crude from Opec+ producers and a collapse of fuel demand caused by global stay-at-home restrictions to contain the spread of Covid-19.

The market "worked to perfection", CME chief executive Terrence Duffy said in the days after the crash.

But commodities regulator the CFTC has yet to produce a comprehensive study explaining exactly why prices fell so hard, so fast. The agency released an "interim" report in November describing market conditions but has not said if the market functioned efficiently or if changes were warranted.

"At this time, we are not drawing firm conclusions on the appropriateness of the prices during that day," acting CFTC chief economist Scott Mixon said at the time. The CFTC has left open the possibility that it will produce a subsequent report but declined to comment on its current status.

It is not necessarily another pandemic that could set off a similar period of turbulence in the markets. A historic cold snap in February caused days of power shutdowns in Texas and froze wellheads across the Permian basin. Unprecedented wildfires disrupted power supply in California just last summer.

"In the past year, we have had 100-year events all over," says CFTC commissioner Dan Berkovitz, who wants the agency to produce a comprehensive report on the oil price crash.

Berkovitz last month separately called for revisions to "trading at settlement" rules for WTI crude futures contracts that were traded at high amounts on 20 April 2020, based on concerns that it could leave open the possibility of market manipulation of oil prices.

By Chris Knight

Front-month Nymex WTI

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03/05/25

Opec+ eight agree accelerated hike for June: Update

London, 3 May (Argus) — A core group of eight Opec+ members has agreed to accelerate, for a second consecutive month, their plan to unwind some of their production cuts, the Opec secretariat said Saturday. As it did for May, the group will again raise its collective output target by 411,000 b/d in June, three times as much as it had planned in its original roadmap to gradually unwind 2.2mn b/d of crude production cuts by the middle of next year. The original plan envisaged a slow and steady unwind over 18 months from April, with monthly increments of about 137,000 b/d. But today's decision means that the eight — Saudi Arabia, Russia, the UAE, Kuwait, Iraq, Algeria, Oman and Kazakhstan — will have unwound almost half of the 2.2mn b/d cut in the space of just three months. The decision to maintain this accelerated pace into June is somewhat surprising, given the weakness in oil prices and the outlook for the global economy. The eight's decision last month to deliver a three-in-one hike in May was seen as a key reason for the recent slide in oil prices, alongside US President Donald Trump's tariff policies. Front month Ice Brent futures have fallen by about $13/bl since early April to stand at just over $61/bl. But the eight today pointed to "current healthy market fundamentals, as reflected in the low oil inventories" as a key factor in its latest decision. It reiterated, as it has in the past, that the gradual monthly increases "may be paused or reversed subject to evolving market conditions." As was the case for May, delegates said that the main driver for the June hike was again a desire to send a message to those countries that have persistently breached their production targets since the start of last year — most notably Kazakhstan and Iraq, which each have significant overproduction to compensate for through the middle of next year. "This measure will provide an opportunity for the participating countries to accelerate their compensation," the secretariat said. This group of eight is due to next meet on 1 June to review market conditions and decide on July production levels. By Nader Itayim, Aydin Calik and Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Opec+ eight to agree another accelerated hike for June

03/05/25

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03/05/25

Opec+ eight to agree another accelerated hike for June

London, 3 May (Argus) — A core group of eight Opec+ members look set to today to accelerate, for a second consecutive month, their plan to unwind some of their production cuts, four delegates told Argus . As it did for May, the group would again raise its collective output target by 411,000 b/d in June, three times as much as it had planned in its original roadmap to gradually unwind 2.2mn b/d of crude production cuts by the middle of next year. The original plan envisaged a slow and steady unwind over 18 months from April, with monthly increments of about 137,000 b/d. But today's decision would mean that the eight — Saudi Arabia, Russia, the UAE, Kuwait, Iraq, Algeria, Oman and Kazakhstan — will have unwound almost half of the 2.2mn b/d cut in the space of just three months. The decision to maintain this accelerated pace into June would be somewhat surprising, particularly given the weakness in oil prices and the outlook for the global economy. The eight's decision last month to deliver a three-in-one hike in May was seen as a key reason for the recent slide in oil prices, alongside US President Donald Trump's tariff policies. Front month Ice Brent futures have fallen by about $13/bl since early April to stand at just over $61/bl. While Opec+ has said that it is acting to support an expected rise in summer demand, the decision to speed up the output increases once again appears to be driven by a desire to send a message to countries that have persistently breached their production targets — most notably Kazakhstan and Iraq. By Aydin Calik, Bachar Halabi and Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Eight Opec+ members weigh further acceleration

02/05/25

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02/05/25

Eight Opec+ members weigh further acceleration

Dubai, 2 May (Argus) — A core group of eight Opec+ producers meet on 3 May to decide whether to repeat last month's surprise move to add extra oil to an increasingly weak market. The main motivation for the group of eight's decision to triple the size of their output increase for May remains, suggesting that a repeat could be on the cards for June. As the dust began to settle on last month's decision, it became clear that raising their combined output target by 411,000 b/d in one month, rather than the scheduled 137,000 b/d, was rooted not only in stronger fundamentals, as the official communique suggests, but also in a desire to send a message to those countries that have persistently breached their production targets. The main culprits are Iraq and Kazakhstan, which have consistently failed to keep their production in check since the start of last year (see graph). The two are left with a lot to do by way of compensating for those excess barrels between now and the middle of next year (see graph). Russia, too, has overproduced during that period, but to a much lesser degree relative to its overall output. That persistent overproduction has been a source of deep frustration among other countries in the group of eight — principally the core of Opec's Mideast Gulf members — that have "sacrificed", in the words of one delegate, to adhere to their targets. April's decision was a nod to those that have sacrificed and a sharp warning to Kazakhstan and Iraq to do better and to do so quickly. Two delegates stressed to Argus at the time that the coming weeks would be critical for Baghdad and Astana to show that they were serious about abiding by their quotas. Failure to do so could trigger another "surprise" move for June, they said, possibly even another three-in-one hike. It was little surprise, then, that some ill-timed comments by Kazakh energy minister Yerlan Akkenzhenov on 23 April — in which he explicitly said Astana's national interests take priority over its Opec+ commitments, and that the country simply "cannot" reduce output — triggered serious speculation about whether the eight may repeat last month's decision. March data from Iraq, too, were not ideal, in that while they showed that Iraq did produce below quota, its efforts to compensate fell well short. Timing is everything Some in the group of eight may well be tempted to go down that route, thinking a second consecutive "shock" could deliver the desired wake-up call that the first did not. Two delegate sources confirmed to Argus that another 411,000 b/d target increase for June remains a distinct possibility. But such a course of action would be risky. Crude is already trading $12/bl below where it was when the group last met, and demand-side concerns are again on the rise because of the potential impact of US trade tariffs. The Opec secretariat and the IEA downgraded 2025 oil demand growth forecasts in their latest oil market outlooks. Opec revised its forecast down to 1.3mn b/d from 1.45mn b/d in its previous report. The IEA revised down its forecast by a sizeable 310,000 b/d to 730,000 b/d for 2025, despite "robust" consumption in the first quarter. It downgraded its forecast for April-December by 400,000 b/d. Another three-in-one hike for June would be "difficult" to imagine in this market, one delegate says. With that said, the eight's options include a "standard" 137,000 b/d rise to the group's collective target for June, in line with the original schedule, or, at a push, a two-in-one hike. That would not only send that internal message to the least compliant of the group, but also act as a show of good faith towards US president Donald Trump ahead of his visit to Riyadh, Abu Dhabi and Doha on 13-16 May. By Nader Itayim, Bachar Halabi and Aydin Calik Opec+ overproducers Opec+ compensation plan Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Chevron has not discussed Kazakhstan Opec+ target: CEO

02/05/25

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02/05/25

Chevron has not discussed Kazakhstan Opec+ target: CEO

London, 2 May (Argus) — Chevron has not held discussions with Kazakhstan about the country's Opec+ targets, chief executive Mike Wirth said today. Kazakhstan's production surged to a record 1.79mn b/d in March , following the start up of a new project at the Chevron-led Tengiz field in January. This left the country 322,000 b/d above its Opec+ target of 1.468mn b/d for the month. Kazakhstan has repeatedly vowed to comply with its Opec+ commitments, and said it would ask foreign operators at its Tengiz and Kashagan fields to reduce output. "We don't engage in discussions about Opec or Opec+ targets," Wirth said on Chevron's first-quarter earnings call today. "The barrels we produce at [Tengiz] are of high value to the government, they're important to their fiscal balance and historically those barrels have not been curtailed." Tengiz production was 901,000 b/d in March, compared with around 600,000-660,000 b/d before the new project came online. Italy's Eni, which is a key partner at the 400,000 b/d Kashagan field, made similar remarks last week. "Neither the operator of the asset, nor the shareholder and the contracting company have been engaged by the authority for any production cuts," said Eni's chief financial officer Francesco Gattei. Kazakhstan is one of the Opec+ alliance's largest overproducers, and there has been no indication that it has tried to reduce output in line with its targets. Kazakhstan's continued overproduction is understood to have contributed towards the decision by eight Opec+ members to add extra crude to the market in May . The eight will meet on 3 May to decide on production levels for June. Two delegate sources told Argus that another 411,000 b/d target increase for June remains a distinct possibility. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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