NEW YORK – United States crude oil futures collapsed below $0 on Monday for the first time in history, amid a coronavirus-induced supply glut, ending the day at a stunning minus $37.63 a barrel as desperate traders paid to get rid of oil.
Brent crude, the international benchmark, also slumped, but that contract was nowhere near as weak because more storage is available worldwide.
While U.S. oil prices are trading in negative territory for the first time ever, it is unclear whether that will trickle down to consumers, who typically see lower oil prices translate into cheaper gasoline at the pump.
As billions of people around the globe stay home to slow the spread of the novel coronavirus, physical demand for crude has dried up, creating a global supply glut.
Traders fled from the expiring May U.S. oil futures contract in a frenzy on Monday with no place to put the crude, but the June WTI contract CLc2 settled at a much higher level of $20.43 a barrel.
“Normally this would be stimulative to the economy around the world,” said John Kilduff, partner at hedge fund Again Capital LLC in New York. “It normally would be good for an extra 2 per cent on the GDP. You’re not seeing the savings because no one is spending on the fuels.”
The May U.S. WTI contract CLc1 fell $55.90, 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 LCOc1 was down $2.51, or 9 per cent, to settle at $25.57 a barrel.
“It’s like trying to explain something that is unprecedented and seemingly unreal,” said Louise Dickson, oil markets analyst at Rystad Energy. “Pricey shut-ins or even bankruptcies could now be cheaper for some operators, instead of paying tens of dollars to get rid of what they produce.”
Refiners are processing much less crude than normal, so hundreds of millions of barrels have gushed into storage facilities worldwide. Traders have hired vessels just to anchor them and fill them with the excess oil. A record 160 million barrels is sitting in tankers around the world.
U.S. crude stockpiles at Cushing rose 9 per cent in the week to April 17, totaling around 61 million barrels, market analysts said, citing a Monday report from Genscape. (Reuters)