Of all the wild, unprecedented swings in financial markets since the coronavirus pandemic broke out, none has been more jaw-dropping than Monday’s collapse in a key segment of U.S. oil trading.

The price on the futures contract for West Texas crude that is due to expire Tuesday fell into negative territory -- minus $37.63 a barrel. That’s right, sellers were actually paying buyers to take the stuff off their hands. The reason: with the pandemic bringing the economy to a standstill, there is so much unused oil sloshing around that American energy companies have run out of room to store it. And if there’s no place to put the oil, no one wants a crude contract that is about to come due.

Underscoring just how acute the concern over the lack of storage is, the price on the futures contract due a month later settled at $20.43 per barrel. That gap between the two contracts is by far the biggest ever.

“The May crude oil contract is going out not with a whimper, but a primal scream,” said Daniel Yergin, a Pulitzer Prize-winning oil historian and vice chairman of IHS Markit Ltd.

“There is little to prevent the physical market from the further acute downside path over the near term,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets. “Refiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.”

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. With no end in sight, and producers around the world continuing to pump, that’s causing a fire-sale among traders who don’t have access to storage.

The extreme move showed just how oversupplied the U.S. oil market has become with industrial and economic activity grinding to a halt as governments around the globe extend shutdowns due to the swift spread of the coronavirus. An unprecedented output deal by OPEC and allied members a week ago to curb supply is proving too little too late in the face a one-third collapse in global demand.

There are signs of weakness everywhere. Even before Monday’s plunge, buyers in Texas were offering as little as $2 a barrel last week for some oil streams. In Asia, bankers are increasingly reluctant to give commodity traders the credit to survive as lenders grow ever more fearful about the risk of a catastrophic default.

In New York, West Texas Intermediate for May delivery dropped as low as negative $40.32 a barrel. It’s far below the lowest level previous seen in continuation monthly data charts since 1946, just after World War II, according to data from the Federal Reserve Bank of St. Louis. Brent declined 8.9% to $25.57 a barrel.

josh123:
How can i buy 50 barrels of oil. I need to store and keep

TheKingIsHere:

Where you wan store am?

LarryBee1k:
When we fail to plan for the future. The future will plan to fail us. Hope we can drink our oil now.

Aflix:
Can they not just stop production for now?

olaboy33:
Very misleading report.

This is only in US oil trading and particularly in west Texas.

Brent oil price in the international market as of today is still well above $20 per barrel.

Please don't create unnecessary panic to the one on ground already.

olaboy33:
Very misleading report.

This is only in US oil trading and particularly in west Texas.

Brent oil price in the international market as of today is still well above $20 per barrel.

Please don't create unnecessary panic to the one on ground already.

VeeVeeMyLuv:
Time for massive buying

olaboy33:
Very misleading report.

This is only in US oil trading and particularly in west Texas.

Brent oil price in the international market as of today is still well above $20 per barrel.

Please don't create unnecessary panic to the one on ground already.

Mysticwebb:
In a layman terms,

TheKingIsHere:


How is it a misleading report?

Is the oil price not falling into negative USA right now?

It is currently trending on twitter

https://twitter.com/NishadiL87/status/1252327814881095680

udemzyudex:


Read his post again.

ponziponzi:


Buying? No one is buying, people will even pay you to take it. This is just WTI crude not sure it affects Brent crude to that extent