NUSADAILY.COM-NEW YORK – For the first time in history US crude oil futures have fallen below zero US dollars. The minus price happened at the end of trading Monday, April 20, 2020 (Tuesday morning WIB).
The drop in oil prices occurred amid an oversupply of world oil. Including conditions when traders who are desperate to pay to get rid of oil whose contracts will expire Tuesday.
West Texas Intermediate (WTI) crude for May delivery slumped 55.9 dollars or more than 305 percent. Ie, settling at -37.63 US dollars a barrel on the New York Mercantile Exchange. The price was reached after touching an all-time low of -40.32 dollars per barrel.
Negative oil prices imply that producers will pay buyers to take oil from their hands. Thus quoted from Antara.
This marks the first time oil futures have traded negatively in history, according to Dow Jones Market Data. The May contract expires on Tuesday.
The WTI contract for June delivery also fell more than 18 percent to 20.43 per barrel.
Meanwhile, the global benchmark, Brent crude oil futures for June delivery fell 2.51 dollars or nine percent. So it closed at 25.57 dollars per barrel on the London ICE Futures Exchange.
Brent decline is not as hard as WTI because more storage is available worldwide.
Traders rushed to dismantle their positions towards the end of the contract, contributing to the historic decline, experts noted.
“We associate the weakening of WTI prices with the expiration of the May contract tomorrow and the accompanying low trading volume,” Giovanni Staunovo, a commodity analyst at UBS Global Wealth Management, told Xinhua on Monday (4/20/2020).
Weaker demand related to the COVID-19 pandemic and potential oversupply is a more severe problem, according to analysts.
“The more decline in liquid liquid futures contracts reflects the broader problems we have in the oil market – a severe oversupply in the second quarter,” Staunovo said.
Demand Drop, Oil Prices Down
Global oil demand is expected to fall by a record 9.3 million barrels per day (bpd) year-on-year by 2020, the International Energy Agency (IEA) warned in its newly released monthly report.
“The impact of locking measures in 187 countries and regions has made mobility almost stopped,” the IEA said, adding April demand was estimated at 29 million barrels per day lower than last year, down to levels last seen in 1995.
When billions of people around the world stay home to slow the spread of the new corona virus, physical demand for crude oil has dried up, creating an excess of global supply. (yos)