Oil prices in New York crashed into negative territory for the first time in history on Monday as the coronavirus crisis saps demand. The unprecedented collapse means that producers would be paying buyers to take oil off their hands reports international media.
According to media, the WTI futures for May delivery fell to minus 37.63 dollars per barrel at one point. The price is now in positive territory, but hovering just above zero. The drop is partly due to market mechanics with the May delivery contract close to expiring, its trading volume was light.
“Storage facilities are also at their limits as producers run out of places to keep the oil. Market players say that traders dumped the May contract as the costs to store and transport crude oil are expected to be higher with no potential consumers,” said media.
Last week, major oil producers including Saudi Arabia and Russia reached a deal to prop up prices by cutting production by nearly 10 million barrels a day.
But that still isn't expected to counter evaporating demand for oil. Market players warn there could be a serious economic impact.
Oil To Hit U.S. Shores As Prices Hit $10
The highest number of Saudi oil shipments in years are making their way to the United States this month, threatening to make an already dire situation in the U.S. oil industry even worse reports Oil Price online.
The report says with oil demand crashing in the lockdown and storage capacity filling up fast, more Saudi oil imports is the last thing the U.S. oil market needs right now.
In times of lockdowns and social distancing, inventories in the U.S. are soaring, storage capacity is stretching thin in many areas, producers are idling rigs and curtailing production, and some regional grades are priced so low that they could soon turn negative. In other words, producers may have to pay their customers to help them get rid of the oil they have pumped.
In early April, tanker-tracking data compiled by Bloomberg showed that Saudi Arabia – the world’s top oil exporter – was making good on its promise to flood the world with oil even as demand collapses, with a surge in tankers carrying Saudi crude to the United States.
Last week, The Wall Street Journal reported that the volume of Saudi crude en route to the United States is seven times higher than the typical monthly intake of Saudi oil in 2019.
The tankers were loaded before OPEC+ struck a new agreement to take 9.7 million bpd off the market in May and June when Saudi Arabia had embarked on an aggressive price war for market share after the previous OPEC+ deal collapsed in early March.
On April 1, when the previous agreement expired, Saudi Aramco boasted that it was “breaking records to supply 15 tankers with over 18.8 million barrels of oil,”