KUALA LUMPUR, April 28 – OCBC Treasury Research says it expects crude oil prices to continue to trade at the current depressed levels through the second quarter of this year as the market is still in a state of abyss.
On April 20, the United States’ benchmark West Texas Intermediate (WTI) crude futures collapsed to -US$37 a barrel, a first in the history of oil prices.
OCBC said last week’s implosion appeared to be a result of poor management from the US Oil Fund’s (USO) inability to execute a high volume of rollover from May to June within the short span of a week.
It was also due to a long squeeze from US physical buyers, who realised that the Cushing Hub ran out of storage space too late, the research house said.
Nevertheless, OCBC believes such market mismanagement is unlikely to happen again in the short term.
“While we expect prices to remain depressed, we do not see the economic justification for a benchmark crude oil to be trading at negative prices,” it said in a note today.
OCBC added that the mood in the market remains highly bearish and uncertain, with no clear indication of when demand might return and storage set to run out by the end of the second quarter of 2020.