US oil prices fell below zero for the first time in their history yesterday as excess oil supply was practically discarded.
US oil prices turned negative on Monday 20th of September as oil producers had no room to store excess crude, a result of weak global demand – this resulted in a historic market collapse, significantly impacting oil traders across the world.
US Crude Oil fell from $18/b to -$38/b within the space of a few hours, as producers were forced to pay buyers to take excess oil off their hands due to a lack of means to store it.
This is the latest economic casualty of the Coronavirus outbreak as global markets struggle to recover.
Price are in positive territory again this morning as the WTI contract for May has expired; prices ended the day at -$37.63/b and opened this morning’s session at $1.10/b. The expiry of the May contract led to frantic trading as producers offloaded their surplus supply.
Recent weeks have seen the biggest slump on oil markets for 25 years due to global lockdowns and restricted air travel.
Despite this, oil companies have produced near record amounts but this latest price crash will force some producers to shutdown their rigs and oil wells until the market recovers.
The West Texas Intermediate price (the US benchmark for oil) is expected to trade around $20/b this week, while the international benchmark, Brent Crude is currently trading around $26/b.
Forecasts predict a recovery on markets in the second half of the year as nations come out of lockdown and oil firms reduce production. However, analysts believe that prices will fail to reach levels of $69/b which we saw at the start of the year.