All eyes on diesel as U.S. crude price turns negative – Truck News

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TORONTO, Ont. – It was the U.S. oil industry’s Black
Monday, when the price of crude turned negative for the first time in history.

On that day, May futures contract for West Texas Intermediate (WTI), the benchmark U.S. crude, hit minus $40.32 a barrel before settling at minus $37.63.

The wipeout was blamed on a storage space crisis,
triggered by a slump in demand for oil following the Covid-19 outbreak.

“A hunt for any storage space turns urgent as oil glut
grows,” TD Bank said in a note to investors Tuesday.

“With oil depots that normally store crude oil onshore
filling to the brim and supertankers mostly taken, energy companies are
desperate for more space.”

The bank noted that the alternative was to pay buyers to take their crude, and that was what happened Monday.

Diesel

Diesel prices

But will it affect the prices at the pump, especially diesel prices?

“If refineries start to slow down or even shut down due to no demand for gasoline, this will force up diesel prices significantly as a result.”

– Roger McNight, senior petroleum analyst at En-Pro International.

“Diesel is the only refined product that shows any sign of stamina as the on-road transport sector is answering the call to keep the shelves full for the house-bound consumer,” said Roger McNight, senior petroleum analyst at En-Pro International.

He said diesel prices are 10 cents higher per liter now
than gasoline, which is the opposite of what it should be at this time of year.

“If refineries start to slow down or even shut down
due to no demand for gasoline, this will force up diesel prices significantly
as a result,” McNight said.

Demand for oil has all but dried up over the past few
weeks as people around the world follow stay-at-home orders, with no need to
commute.

The situation was exacerbated by a price war between
Saudi Arabia and Russia. The two countries have since agreed to cut supply by
almost 10 million barrels per day, but the global glut continues.

Will this be carried through for June futures or July
or August or even September?

“Crude will stay low as long as there is no demand for crude oil and its ultimate derivatives: gasoline, diesel and jet fuel,” said McNight.

“That won’t come back until Covid-19 goes away. We are
a long way from that.”

Prof. Hanke

But Johns Hopkins economist Steve Hanke believes Monday’s crash will not be repeated.

“Mark this day on your
calendar. You will never see a day like it again,” he tweeted.

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