Chennai: US oil prices turned negative for the first time in history amid the deepest fall in demand in 25 years.
A flood of unwanted oil in the market caused the West Texas Intermediate (WTI), the benchmark price for US oil, to plummet to almost –$40 a barrel after the fastest plunge in history. That meant producers were paying buyers to take oil off their hands.
US crude oil futures ended the day at a stunning minus $37.63 a barrel as traders sold heavily because of rapidly filling storage space at the key Cushing, Oklahoma, delivery point.
Brent crude, the international benchmark, also slumped, but that contract was nowhere near as weak because more storage is available worldwide.
The May U.S. WTI contract fell $55.9, or 306 per cent, to settle at a discount of $37.63 a barrel after touching an all-time low of -$40.32 a barrel. Brent was down $2.51, or 9 per cent, to settle at $25.57 a barrel.
“The storage is too full for speculators to buy this contract, and the refiners are running at low levels because we haven’t lifted stay-at-home orders in most states,” Phil Flynn, an analyst at Price Futures Group in Chicago, was quoted as saying by Returers.
According to an AP report, much of the drop was chalked up to technical reasons – the May delivery contract is close to expiring so its trading volume was light, which can exacerbate swings. But prices for deliveries even further into the future, which were seeing larger trading volumes, also plunged. Demand for oil has collapsed so much that facilities for storing crude are nearly full.