(Reuters) - Key physical U.S. crude grades in the country detached from the massive sell-off in futures on Monday, with prices in Texas firming even as the front-month U.S. contract collapsed to less than $5 a barrel, traders said.
Prices for U.S. West Texas Intermediate crude in East Houston, known as MEH, climbed to trade at $6.50 a barrel above futures while prices in Midland strengthened to trade $4 a barrel above futures, dealers said.
The May U.S. crude futures contract plunged more than 55% to the lowest on record ahead of expiration, as storage fills to the brim, particularly in Cushing, Oklahoma, the delivery point for benchmark futures.
Inventories at Cushing rose by another 5 million barrels last week, traders said, citing Genscape data. The hub is expected to hit maximum working capacity in just two weeks at current rates, they said.
The collapse in prompt prices widened the spread between futures for delivery in May to those for delivery in June to more than $16 a barrel, the widest front-month spread on record.
“Differentials are reacting to the spreads to keep production moving. If futures prices fall, differentials have to react to keep it high,” one trader said.
“The problem is with no real demand, what do you do with it. They keep producing but you don’t want to get caught with physical barrels for May.”
Reporting by Devika Krishna Kumar in New York; Editing by Tom Brown