With space to store oil scarce, US benchmark West Texas Intermediate for May delivery ended trading at -$37.63 a barrel ahead of Tuesday’s close for futures contracts — when traders who buy and sell the commodity for profit would have had to take physical possession of it.
“It’s a contract for something that nobody wants to buy,” said Matt Smith of ClipperData.
The unprecedented price drop is a consequence of the coronavirus pandemic, which has devastated the global economy by forcing billions of people to stay home to stop its spread, and an ongoing price war between top producers Saudi Arabia and Russia.
That price war contributed to an oversupply that drove crude lower, to the disadvantage of US shale producers.
A deal announced last week between OPEC and its peers would have lowered production by about 10 million barrels a day from May, but that’s plainly not enough.
“There is no demand for gasoline and diesel fuel,” said John Kilduff of Again Capital. “The demand has just plummeted.”
Smith, however, noted that Monday’s negative prices were a reaction to the storage shortage ahead of the Tuesday deadline, and once that passes, they should turn positive again.
“In two days, it will be gone,” he said.