Oil Price Falls to Below $0 for First Time in History as Coronavirus Pandemic Causes Global Demand to Dip.
US crude oil has traded at negative prices for the first time in history, with demand for energy collapsing amid the coronavirus pandemic.
The plunge defied a deal reached last week by the Organization of the Petroleum Exporting Countries (OPEC) and independent producers to slash output by nearly 10 million barrels per day starting May to boost prices. It also showed the enduring power of the pandemic, which has forced people to stay indoors to stop the spread of COVID-19, bringing much of the global economy to a halt.
“They’re going to go back with caution,” says J.J. Kinahan, chief market strategist of TD Ameritrade. “Let’s not get ahead of ourselves.”
West Texas Intermediate crude for May delivery CLK20, -104.09%CL.1, -104.09% finished down $55.90, or 306%, at negative $37.63 a barrel. The May contract expires on Tuesday.
The one-day plunge is the largest on record going back to 1983, and also the lowest level for a contract on record, according to Dow Jones Market Data.
Underscoring just how acute the concern over the lack of storage is, the price on the futures contract due a month later settled at $20.43 per barrel. That gap between the two contracts is by far the biggest ever.
Saudi Arabia, Russia and other producers tried to prop up prices with a deal last week to slash production by 9.7 million barrels per day in May and June, the deepest cut ever negotiated. But that isn’t expected to soak up the supply glut caused by evaporating demand for energy.
Photo credit: Reuters
Demand for oil has collapsed amid a worldwide lockdown as countries try to contain the covid19 pandemic. Added to that, a glut on the market and a price war between Russia and Saudi Arabia have put pressure on prices, even as both countries agreed to cut production.
The plummeting of Oil Price markets on Monday, the last day oil producers can trade barrels for next month, solidified a trend which has been evident since the coronavirus pandemic brought economies around the world to a halt last month.
“While on the surface, a $0 oil price would suggest producers stop production, in theory, it is more economic to pay someone to take the crude rather than shut the well (as there are costs associated with shutting a well) up to the shut in cost,” Amrita Sen, Chief oil analyst at Energy Aspects, told Newsweek Monday.
Climate advocates have called on the U.S. to take advantage of the Oil Price crisis to make a fundamental shift to clean energy, but Trump and congressional Republicans have said they plan to push for a fossil fuel industry taxpayer bailout.
Stocks were also slipping on Wall Street in afternoon trading, with the S&P 500 down 0.9%, but the market’s most dramatic action was by far in oil, where benchmark U.S. crude for May delivery plummeted to negative $3.70 per barrel, as of 2:15 pm. Eastern time.
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