Washington: US oil prices crashed into negative territory for the first time in history ending the day at a stunning minus US$37.63 a barrel as traders sold heavily because of rapidly filling storage space at the key Cushing, Oklahoma, delivery point.
The situation emerged because of the evaporation of demand caused by the coronavirus pandemic left the world awash with oil and not enough storage capacity — meaning producers are paying buyers to take it off their hands.
West Texas Intermediate, the US benchmark, traded as low as -$40.32 a barrel in a day of chaos in oil markets. The settlement price on Monday was -$37.63, compared to $18.27 on Friday. Traders capitulated in the face of limited access to storage capacity across the US, including the country’s main delivery point of Cushing, Oklahoma.
The American oil industry is facing a doomsday scenario.
The coronavirus pandemic has caused oil demand to drop so rapidly that the world is running out of room to store barrels. At the same time, Russia and Saudi Arabia flooded the world with excess supply.
Investors who have flooded into the oil markets to bet on a rebound in crude prices are risking big losses, say commodity specialists, as the exchange traded funds they use are swept up in the current market turmoil.
The moves came as President Donald Trump said he would sign an executive order to temporarily suspend immigration to the United States to protect jobs “in light of the attack from the Invisible Enemy.” Millions of Americans have filed for unemployment benefits as the coronavirus pandemic shuts down economic activity in much of the country.