Why all eyes will be on the expiry of Brent oil futures this week

The expiry of the June contract for Brent oil futures in Europe on Thursday will possibly be the most watched event in oil markets for some time after the US benchmark plummeted below zero for the first time in history last week.

The coronavirus pandemic has killed oil demand as over four billion people are in lockdown and last week, ahead of its contract expiry, US West Texas Intermediate (WTI) futures crashed deep into negative territory making it a liability for anyone holding it.

Analysts and investors have been wondering if the same will happen to Europe's Brent oil futures, but most agree that while there are no technical obstacles for the contract going the same way, it is hard to see why it would.

Brent is considered to be the international marker by the oil industry as it is linked to seaborne crude so has fewer storage limitations than WTI, which is settled against a major landlocked storage site in Oklahoma.

Brent is run by the Intercontinental Exchange (ICE) in Europe and other crudes are unofficially pegged to it, so there is more vested interest in keeping it stable.

Nevertheless, last week, ICE said it was ready to switch mathematical models, from Black-76 to Bachelier, to settle contracts at negative prices if needed.