For the first time on record on Monday, US oil prices turned negative after oil producers run out of room to store the surplus supply of crude oil caused by the coronavirus outbreak, causing a dramatic crash in the market that caused oil traders scrambling.
US crude oil prices plummeted in a matter of hours from $18 a barrel to -$38, when growing supplies of crude oil threatened to overtake storage facilities and forcedoil producers to pay sellers to take the barrels they could not hold.
The price downturn reflected the effect of the coronavirus epidemic on demand for oil as the world economy plunged.
Crude oil prices get low
Prices above zero rebounded on Tuesday, with the US benchmark West Texas Intermediate for May changing hands at $1.10 a barrel after closing on Monday at -$37.63 in New York.
Recent weeks’ accelerated downturn in the market had reached fever pitch on Monday as traders approached their last day in May to exchange oil for delivery before the contracts expire. The deadline caused a price crash, as distressed oil dealers were forced to take action with more crude than storage capacity.
Daniel Yergin, a Pulitzer-winning oil historian, said: “It’s not a whimper. But a primitive cry. That the Can crude oil contract goes out.”
Oil prices from the US shale heartlands have been slowly decreasing in recent weeks. After the largest downturn in oil demand for measures in 25 years. Due to travel restrictions to curtail Covid-19’s expansion. The decline has been accelerating in the face of growing concerns. That the global economy can experience the worst slowdown since the Great Depression.
Oil producers have continued to pump near-record amounts of crude oil into the global market. Even though analysts have cautioned that the effects of coronavirus outbreak. It would send oil demand to its lowest levels since 1995. This is expected that the advent of low oil prices. It would cause some oil producers. To rush the shutdown of their rigs and oil fields to prevent plunging further into debt or bankruptcy.