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.