A MONTH after sellers had to pay nearly US$40 a barrel to get rid of U.S. oil futures, the next watershed moment looms with the expiry of the June contract today — and so far there is little sign of a repeat of the historic plunge.

The extent of the damage that the coronavirus pandemic had inflicted on the oil industry came into focus April 20, when the U.S. benchmark WTI contract plunged to minus US$38 a barrel.

The virus destroyed so much fuel demand as billions of people stopped traveling that there was almost nowhere left to store the oil. So on the day before the May contract expired, investors stuck with barrels had to pay buyers to take it away.

A month later, governments around the world are slowly lifting travel restrictions and there are signs that demand is recovering from its nadir. Oil prices have staged something of a recovery, with U.S. crude rising yesterday to more than US$30 a barrel and hitting its highest level since March 16.

As oil producers worldwide cut output rapidly, the pressure on storage is easing: U.S. government data this week showed crude inventories fell.

“There’s clearly a different feel to the oil market heading into this contract expiry, with production cuts having been enforced globally, either through deals or unilaterally,” said Craig Erlam, senior market analyst at OANDA.

“But will it be enough to avert another panic selling moment? The odds have certainly reduced ... there’s a fine line between confidence and complacency and we can only hope that line hasn’t been crossed or early next week it could quickly unravel.”

The positive mood was reinforced as U.S. Federal Reserve Chairman Jerome Powell issued an optimistic outlook for economic recovery later this year.

“Assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year,” Powell said Sunday.

Still, the U.S. Commodity Futures Trading Commission, the federal agency that oversees futures and options trading, issued a rare warning Wednesday to exchange operators and brokerages ahead of expiry, telling them they need to protect markets from manipulation and potentially intervene to protect customers. (SD-Agencies)