A post by Ovi at peakoilbarrel
As I wrote in my previous post, preparing these last two has been a surrealistic exercise. The oil market environment for this post has been even more surrealistic than the previous one and the associated futures contract prices have been extremely volatile this week. The May WTI front month contract went negative on April 20 for the first time ever and closed at negative $37.63/bbl while the June contract closed at $20.43. Today’s settled price, April 24, for the June contract is $16.94.
On April 7th, OPEC + finalized a record oil production cut of 9.7 Mb/d after days of discussion. The 9.7 million bpd cut will begin on May 1 and will extend through the end of June. The cuts will then taper to 7.7 million bpd from July through the end of 2020, and 5.8 million bpd from January 2021 through April 2022. The 23-nation group will meet again on June 10 to determine if further action is needed.
The lone hold out to the deal was Mexico which was expected to cut 400 kb/d but would only agree to 100 kb/d. This was a real Mexican standoff and Mexico won because they had hedged their oil output and the more the price dropped, the more they made on their hedges. According to this report, they hedged their oil at $49/bbl in January. It was unclear how many barrels were hedged or how much was spent.
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