- U.S oil prices tumbled as the economic crisis set off by the coronavirus pandemic continues to take a toll on the energy sector
- The price turned negative for the first time in history
- Oil prices were under pressure as the measures to curb the spread of the virus saw fuel demand evaporate
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U.S oil prices plunged, falling below $0 on Monday, April 20 to $-37.63 a barrel. It is the lowest level since oil futures trading began in 1983 as the economic crisis set off by the coronavirus pandemic continues to take a toll on the energy sector
Al Jazeera reports that oil prices were under pressure as the measures to curb the spread of the virus saw fuel demand evaporate.
That means oil producers are paying buyers to take the commodity off their hands over fears that storage capacity could run out in May 2020.
“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.
He added that: “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.”
The price collapse in US oil market - known in the industry as the West Texas Intermediate price - accelerated because it is the last day oil producers can trade barrels that are scheduled for delivery next month when oil storage is expected to reach capacity.
“The problem of the global supply-demand imbalance has started to really manifest itself in prices,” Bjornar Tonhaugen, head of oil at research firm Rystad Energy told The Guardian.
“As production continues relatively unscathed, storages are filling up by the day. The world is using less and less oil and producers now feel how this translates,” he noted.
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.
Experts say the problem is that the United States is running out of places to store its oil.
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