The price of the main USA oil bench mark, West Texas Intermediate, fell more than $50 a barrel to end the day about $30 below zero, the first time oil prices have ever turned negative. Futures for next month's contract also dropped to $22.05 a barrel, according to the outlet. Traders capitulated in the face of limited access to storage capacity across the United States, including the country's main delivery point of Cushing, Oklahoma.
U.S. oil producers are also reducing production, but not rapidly enough.
The huge drop in prices Monday was exaggerated by the way oil prices are set.
WTI for June dropped as much as 68% to $6.50 a barrel in NY before recovering to $9.55 at 1:57 p.m.
"It normally would be good for an extra two per cent on the GDP".
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Does that mean you'll soon be able to fill your tanks with ultra-cheap fuel?
Crude stockpiles at Cushing - America's key storage hub and delivery point of the WTI contract - have jumped 48% to nearly 55 million barrels since the end of February. Brent, the worldwide benchmark, lost 8.9 per cent on Monday to fall to $25.57 a barrel, but is less immediately afflicted by storage issues. Traders are hesitant to purchase crude with nowhere to store it.
David Winans, director at US Investment Grade Credit Research, PGIM Fixed Income, said that oil prices will vary depending on the COVID-19 pandemic's development. Again, if the downward trend continues, they will be forced to cut production even more. "With demand still dead and OPEC+ cuts not hitting fast enough, the market looks like it has no bottom". But oil storage capacity may be full as early as in the middle of May, according to many analysts. "But we disagree that India will not benefit much of these prices as the import volumes are also impacted by large portion", Kalra said. The fund said last week it would move some of its WTI holdings into the July contract, citing regulatory and market conditions.
Since the start of the year, oil prices have plunged after the compounding impacts of the coronavirus and a breakdown in the original OPEC+ agreement.
The May WTI contract closes on Tuesday, and the contract for June delivery is now more actively traded. "There's not a lot of hope that things are going to change in 24 hours".
The price of a barrel of crude is based on factors such as supply, demand and quality. The excess supply of oil on the market is now estimated at 25 million barrels per day and filling storage exceeds 70 percent. So rather than face the additional costs, some producers immediately sold their oil at an even lower price - and in turn brought oil futures' prices down to historic lows.