Oil Prices Hit Record Low As Demand Diminishes
For the very time in history, the oil prices turned negative on Monday in United States, as all the storage capacity has filled up. The economic experts believe that the fuel consumption recovery would take a lot of time, since the lockdown imposed due to the deadly coronavirus would not end anytime soon.
The traders are not currently willing to take delivery of the oil barrels because there is no place to put the crude, creating a global supply deficit as billions of people stay home to counter the spread of the novel coronavirus.
International media reported that the May US crude futures plunged to a depth never before seen, settling on the day at minus $37.63 a barrel, declining $55.90 a barrel (305%). Prices set a low of negative $40.32. “The May US WTI contract fell $19.06 (104.3%) to a discount of 79 cents a barrel at 6:09pm GMT after touching an all-time low of -$1.43 a barrel. Brent was down $1.85 (6.6%) at $26.23 a barrel,” the report noted.
Meanwhile, the major oil-producing nations have agreed to cut output and global oil companies are trimming production but those cuts will not come quickly enough to avoid a massive clog.
Edward Moya, a market analyst at OANDA in New York said, “For many investors or people using these contracts for hedging this is really a big pain. There’s no place to put it – we’re running out of space to store oil.”
It is noted that worldwide oil consumption is roughly 100 million barrels a day, and supply generally stays in line with that. But now consumption is down about 30% globally, and the cuts so far are quite less.