Oil, gas and mining

U.S. Oil Fund's top competitor breaks down the state of crude oil ETFs

Jason Bloom, director of global macro ETF strategy at Invesco, breaks down Invesco’s oil ETF and what’s at stake after a collapse in crude prices with CNBC’s Bob Pisani. Also with Tom Lydon, CEO of ETF Trends and ETF Database, and Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA Research.

U.S. oil prices plunged nearly 25% on Monday on fears that worldwide storage will soon fill as the coronavirus pandemic continues to roil demand.

West Texas Intermediate for June delivery fell 24.56%, or $4.16, to settle at $12.78 per barrel, after earlier trading as low as $11.88. International benchmark Brent crude fell 6.76% to settle at $19.99. Each contract is coming off its eighth week of losses in nine weeks.

WTI for July delivery fell more than 14% to $18.18 while the August contract slipped more than 9% to $21.50, suggesting the Street doesn’t see a meaningful recovery in the next few months.

“The market knows that the storage problem remains and we are on a calculated path to reach tank tops in weeks,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy. “Actions are needed now as the problem stopped being theoretical and far away. The storage clock is ticking for producers and we are approaching the final countdown if no further action is taken.”

WTI, the U.S. benchmark, has fallen more than Brent as traders eye the quickly filling tanks at Cushing, Oklahoma, which is the nation’s largest storage facility apart from the Strategic Petroleum Reserve. It’s also where the contract is priced. U.S. stockpiles rose by 15 million barrels to 518.6 million barrels for the week ending April 17, according to the U.S. Energy Information Administration.

At closely watched Cushing, oil in storage rose by about 10% in a week to 59.7 million barrels, about 25 million barrels shy of its capacity.

With prices at such depressed levels — WTI and Brent have dropped 72% and 68% this year, respectively — producers are struggling to breakeven. On Sunday, Houston-based Diamond Offshore Drilling filed for bankruptcy protection, and analysts say that more bankruptcies could be coming.

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