LONDON| On Monday US oil prices tumbled like never before. For the first time, New York ended in negative territory amid a devastating supply glut that has forced traders to pay others to take the commodity.
Space to store oil scarce, US benchmark West Texas Intermediate for May delivery ended trading at $37.63 a barrel ahead of Tuesday’sclose for the futures contracts when traders who buy and sell the commodity for profit would have had to taken physical possession of it.
Matt Smith of ClipperData, “It’s a contract for something that nobody wants to buy”.
The remarkable decline comes as the petroleum industry emerges as one of the corners of the global economy made the most vulnerable by government shutdowns to limit the spread of coronavirus.
The commodity has been further weakened by a battle for market share that raged much of the spring between Saudi Arabia and Russia.
A deal announced last week between OPEC and its peers to cut production by about 10 million barrels per day from May appears not to have been enough, while the closely-monitored storage capacity at Cushing, Oklahoma was almost full as of Monday morning.
AxiCorp’s Stephen Innes said, “a dump at all cost as no one… wants delivery of oil, with Cushing storage facilities filling by the minute”.
“It hasn’t taken long for the market to recognize that the OPEC+ deal will not, in its present form, be enough to balance oil markets.”
Still, Smith noted that Monday’s negative price only affects oil deliveries due Tuesday.
US oil futures for delivery in May also fell sharply, by 18 per cent, but finished at $20.43 per barrel.