Petrotahlil - Oil traded near zero, after plunging below that level for the first time in history amid rapidly filling American storage tanks, as the U.S. benchmark’s May contract entered its final trading session.
Futures in New York fluctuated between positive and negative territory, after plunging to as low as -$40.32 on Monday. The June contract, where the majority of trading is now taking place, fell below $20, as did Brent futures for the same month.
The spread between the two reflects the growing fear that those who take physical delivery of crude in the near future may not find any outlet or storage for those barrels as refineries curb operations. The world’s biggest independent storage company said Tuesday almost all of its space is sold.
With the coronavirus pandemic bringing the U.S. and much of the global economy to a standstill, processors are using far less crude, leaving so much unused oil that American energy companies are running out of room to store it. And if there’s no place to put the oil, nobody wants a crude contract that is about to come due.
“The advent of negative prices on a benchmark future will send a very strong signal to OPEC+ and G-20 producers of the dangers facing the industry,” said Callum MacPherson, head of commodities at Investec Bank Plc. “This may be a foretaste of what is to come if they do not take more coordinated action to manage the situation.”
The extreme moves in West Texas Intermediate crude show just how oversupplied the U.S. oil market has become. The WTI June contract is likely to see downward pressure in coming weeks and there will be a “violent rebalancing” in American production as storage fills up, Goldman Sachs Group Inc. said in a note.
The price collapse is reverberating across the oil industry, with prices trading below zero across the U.S. WTI Midland in Texas stood at -$13.13 a barrel, while crude in Alaska was at -$46.63.
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