On Tuesday, June WTI crude which expired at the end of the session, remained above the price for the July contract, ending at $32.50 a barrel

On Tuesday, June WTI crude which expired at the end of the session, remained above the price for the July contract, ending at $32.50 a barrel after surging 8.1% on Monday.

Unlike last month when the may contract was settled at a negative price, Junte WTI crude was supported by  global supply cuts and signs of improving demand.

WTI crude oil prices settled in backwardation, meaning that the spot price and nearby futures are higher than contracts for later delivery. This was a shift compared to the contango observed last month (later dated futures are bid higher than nearby contracts) indicating a near-term oversupply and offering incentive to store it for future use under the condition that the difference in price is greater than the cost of storage.

As a reminder the oil market witnessed a never before seen event in its entire history, which is the price on the futures contract for West Texas crude, went into negative territory of USD – 37.63 a barrel. Such a movement could be attributed to the ongoing Covid-19 situation. To be specific, since the pandemic led to a global economic halt, there is already much unused oil stored that American energy companies have run out of space to store it. It is important to note that the settlement of the futures contract, would involve a physical delivery of the oil, which comes with a burden of high carrying costs and the current low demand and almost no place of storing it. Such situation led to a selloff, which resulted in the WTI futures contract ending up in negative territory.