June oil contracts falls below $10; July falls below $20

May and June are nearing convergence

The May contract has quietly recovered a huge chunk of yesterday’s losses and is trading at $8.50 per barrel just 45 minutes ahead of final settlement. That reveals there is — at least — some real demand for crude oil barrels.

However the June contract is in a crunch because the USO ETF owns 30% of it and speculative longs are probably having second thoughts after yesterday. That’s leaving few buyers and it’s down 52% to $9.74.

The problem with that contract is that 30% of it is held by USO and the ETF simply can’t go negative without leaving someone with some stupendous losses.

Looking even further out, the July contract is now down $6.55 to $19.67 in another brutal drop and contracts out a year are down at least $3/barrel.

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