The U.S. WTI oil price plunged below zero for the first time ever
On Monday, the price of a oil barrel for May contracts was traded for –$40. The reason is lack of repository where to keep produced oil.
The unprecedented situation appeared on oil futures market for the first time in history of trading the U.S. WTI oil. Demand for May delivery dropped to zero. Yet, producers in North America can’t stop pumping crude from their wells, they can only lower their production capacities. The market is overwhelmed with the amount of black gold and there’s almost nowhere to store it until oil demand grows again.
Around 160 million barrels is stored in tankers all around the world, and that is roughly 1,6 times more than daily oil production before the coronavirus pandemic outbreak. The U.S. crude stockpiles at Cushing, Oklahoma consist of around 61 million barrels. According to analysts, there’s no signal that the situation on oil futures market should improve any time soon.
Oil futures for June and later delivery could bring some optimism. A price per barrels is traded over $20, and September delivery price grew to over $30. Yet, if the current rigidity of global economy persists, we may witness negative WTI oil futures even in upcoming days and weeks.