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Crude oil prices plunged below zero for the first time in history on Monday, with traders actually paying to get barrels of the stuff off their hands as the coronavirus kills demand. The May futures contract for West Texas Intermediate crude, which is set to expire Tuesday, settled at negative $37.63 per barrel, down $55.90 …
Crude oil prices plunged below zero for the first time in history on Monday, with traders actually paying to get barrels of the stuff off their hands as the coronavirus kills demand.
The May futures contract for West Texas Intermediate crude, which is set to expire Tuesday, settled at negative $37.63 per barrel, down $55.90 or 306 percent, on Monday afternoon.
That’s an indication that traders were paying a substantial premium for the ability to slash bloated inventories amid concerns that producers are churning out more fuel than the world can store.
The below-zero contracts are deals to purchase oil due to be delivered next month, but many are concerned there won’t be anywhere to put it given that oil is still being pumped and demand has evaporated amid the pandemic.
Tanks are full at key facilities across the US, traders said, including the country’s main delivery point of Cushing, Oklahoma.
The June contract for US crude, meanwhile, held up better but was still down 11 percent at $22.26 a barrel as of 1:43 p.m. And the June futures contract for international Brent crude was recently off 8.7 percent at $25.62 a barrel.
“Oil prices tend to be a gauge for the health of the global economy,” said Dan Russo, chief market strategist at Chaikin Analytics. “It’s difficult to be bullish on global economic growth with oil prices at multi-decade lows.”
Oil prices have plunged in recent months as the coronavirus crisis led to global travel restrictions and caused demand for travel to evaporate. An international price war between Russia and Saudi Arabia exacerbated the situation by causing a glut of supply.
The latest plunge came amid fears that an international deal to cut global oil production by 9.7 million barrels a day would not be enough stabilize a market rattled by the virus crisis.
The International Energy Agency has predicted demand for oil will plummet by 26 million barrels a day in May, while supply will fall by just 12 million barrels that month following the deal between Russia, Saudi Arabia and other countries.
With Post wires; additional reporting by Thornton McEnery
