"It's a grim situation, playing out in the oil markets
grabbing eyeballs of the entire investor fraternity and defying logic. The absolute collapse of WTI prices is primarily owing to the expiry of May WTI contracts, alongside the significant demand destruction due to lockdowns in several countries and supply glut in oil markets.
Put simply in other words, the sellers are paying the buyers. Oil traders are unwilling to take the delivery owing to lack of storage space. In complete contrast, Brent crude prices are trading at about $25/bbl. The reason for this sharp divergence is that WTI needs to be physically delivered at Cushing, Oklahoma whereas for Brent contract, deliveries can be done offshore at multiple locations," said Sugandha Sachdeva VP-Metals, Energy & Currency Research at Religare Broking.
Adding, "Note that the WTI June contract is still trading higher. The storage constraints at Cushing, Okhalama has led to dumping and unwinding in May contract and market participants moving to June contract."
Among aviation stocks, SpiceJet was frozen at 5 per cent lower circuit limit of Rs 45.35 while InterGlobe Aviation was down 2.6 per cent at Rs 978.35 apiece on the BSE. Paint stocks, too, were trading in the red. For instance, Berger Paints was down around a per cent at Rs 510 while Kansai Nerolac Paints was down over 2 per cent at Rs 387. Asian Paints, on the other hand, was trading flat at Rs 1,734.80.
Apollo Tyres traded over 4.5 per cent lower at Rs 93 and JK Tyre was down nearly 5 per cent at Rs 50.
Oil prices have been pressured for weeks with the coronavirus
outbreak hammering demand while Saudi Arabia and Russia fought a price war and pumped more. The two sides agreed more than a week ago to cut supply by 9.7 million barrels per day (bpd), but that will not quickly reduce the global glut.
According to a Reuters report, Brent oil prices have collapsed around 60 per cent since the start of the year, while US crude futures have fallen around 130 per cent to levels well below break-even costs necessary for many shale drillers. This has led to drilling halts and drastic spending cuts.