Yesterday, something remarkable and unprecedented happened--the price of WTI crude (the US standard) fell to negative levels, closing at -$37.63 in New York.
This is primarily because of the way crude is traded--May futures expire on Tuesday, so traders needed to find someone to take the oil. Because of the crash in oil demand due to the coronavirus pandemic, oversupply has filled up storage facilities and fewer buyers are looking for the commodity.
Traders are looking ahead to June contracts, with higher volumes and prices, at around $20 per barrel of WTI, and $25.61 per barrel for Brent (the international standard).
While the coronavirus is responsible for the initial crash in demand and prices, a recently resolved price war between Moscow and Riyadh magnified the crisis. The pair, along with other OPEC and non-OPEC allies, agreed to cut production by 9.7 million barrels per day.
Analysts believe the cut will not be enough to close the gap between supply and demand, but could lessen pressure on storage facilities.
While the negative crude prices are linked to traders rushing to close before May contracts expire, AFP reported that the crash in US crude prices was partially triggered by the WTI storage facility in Cushing, Oklahoma, which is filling up.