Thailand
No negative oil prices in Thailand
Oil prices in Thailand are unlikely to fall below zero in line with what happened in the US on Monday for the first time in history, as other index prices around the world remain intact.
Energy expert Manoon Siriwan said local retail oil prices are still in a downward trend and will stay below US$30 a barrel but are unlikely to drop into negative prices like West Texas Intermediate (WTI) crude oil.
He said WTI’s below-zero prices will probably last only through May as traders rush to buy the huge supply of excess stock at record-low prices.
WTI futures prices for June remain at relatively normal levels and are unlikely to go below zero again, Mr Manoon said.
Crude oil futures for WTI collapsed as low demand during the coronavirus pandemic resulted in an oversupply of oil with nowhere to put it.
The market closed at -$37.63, meaning sellers were actually paying buyers to get the excess oil off their hands. But Brent crude oil, an international benchmark, fell 8.9% to $25.57 on Monday, showing that the storage issues were mainly in the US.
Mr Manoon said oil futures for May dropped to negative prices as a result of price fluctuation and the looming expiry of delivery contracts.
With the May contracts due to expire, investors holding May contracts had to sell off excess stock before taking deliveries in order to avoid excess storage costs.
If oil traders hold stock from a former delivery month and find nowhere for the oil, they have to sell at negative prices.
US oil demand fell by 20-30% after many major cities went into lockdown to curb the spread of the virus, with no new purchase orders from refineries because they were already in oversupply.
Mr Manoon said the high price fluctuation may last a week because futures will still be trading at an average of $20 in June.
He said the highly fluctuating oil prices were limited to WTI, but not as much for the European Brent benchmark and Asian Dubai benchmark, as both were standing at an average of $20 on Monday.
Local oil retail prices cannot be estimated yet because they depend on the Asia refined oil benchmark, Platts.
The fluctuation of the US oil benchmark may have an insignificant impact on Thailand’s retail oil prices because in the coming weeks the lockdown may ease in some provinces. Demand for retail oil dropped 10% during the lockdown in Thailand.
Mr Manoon expects the average price of the Dubai benchmark in the second quarter to range between $25 and $30 a barrel.
Opec and non-Opec nations plan to cut oil production at a combined 19.5 million barrels per day from normal pre-outbreak demand of 100 million bpd.
An officer at an oil refining firm who declined to be named said all six oil refiners in Thailand are reducing capacity of refined oil output because demand for retail and wholesale oil has significantly dropped and they are suffering from an oversupply of crude oil and refined oil.
The officer said that while energy policymakers decided to reduce oil stock to 15 days’ equivalent from 21.5 days, the recently collapse of oil demand requires more measures to manage.
“Refiners across the world are processing much less crude than normal, so hundreds of millions of barrels have flowed into oil storage facilities,” the officer said.
Thailand’s largest-capacity oil refiner, Thai Oil Plc, said on Tuesday that the May US WTI contract fell $55.90, or 306%, to settle at minus $37.63 a barrel, Brent dropped $2.51 to $25.57 per barrel and Dubai rose $0.17 to $20.95 per barrel.
Unleaded petrol 95 in Platts on Monday closed at $23.20 per barrel and diesel dropped $0.55 to $30.47 per barrel.
Source: https://www.bangkokpost.com/business/1904625/no-negative-oil-prices-in-thailand