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Oil prices fell again to historical lows as the full impact of the largest oil output cut in history needed time to trickle down to the movement of barrels for May delivery.
Eventually global storage capacity will start to ebb after the low prices caused by the coronavirus pandemic encouraged massive purchases by governments seeking to fill their strategic reserves.
By the end of the week, Brent crude had retreated to $28.08 per barrel while WTI also fell to $18.27 per barrel.
Still the extremely wide spread between Brent and WTI is not helping to make US crude oil exports attractive as physical constraints seems to be dominating market fundamentals.
US crude oil stocks recorded their largest weekly increase at a time of record-low refined petroleum product demand.
Even though the “contango” market structure is too wide, traders and refiners are not showing any interest in buying more oil because they don’t have anywhere to store it. As a result, the US reported the biggest one-week crude oil storage build of all time as refiner demand plummeted.
Commercial crude inventories surged by 19.25 million barrels, eclipsing the previous record-build of 15.18 million barrels realized just one week earlier.
Surprisingly, the “price war” accusation persists with some analysts claiming that it is still simmering, despite the efforts of OPEC+ to restore balance to the market and help to stabilize the collapsing global economy.
The term itself is misleadingly belligerent as the reduction in official selling prices was about staying competitive during a period of unprecedented weak demand.
The Saudi energy minister described the situation as follows:
“A price war is when you are under-pricing heavily, with a view to try and restrain other producers to sell in a particular market. That is not our case. People wait until we do our pricing, and then they assess their pricing according to ours.”