US oil prices turn negative as demand dries up

That means oil producers are paying buyers to take the commodity off their hands over fears that storage capacity could run out in May.

Demand for oil has all but dried up as lockdowns across the world have kept people inside.

As a result, oil firms have resorted to renting tankers to store the surplus supply and that has forced the price of US oil into negative territory.

The price of a barrel of West Texas Intermediate (WTI), the benchmark for US oil, fell as low as minus $37.63 a barrel.

“This is off-the-charts wacky,” said Stewart Glickman, an energy equity analyst at CFRA Research. “The demand shock was so massive that it’s overwhelmed anything that people could have expected.”

The severe drop on Monday was driven in part by a technicality of the global oil market.

Oil is traded on its future price and May futures contracts are due to expire on Tuesday.

Traders were keen to offload those holdings to avoid having to take delivery of the oil and incur storage costs.

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June prices for WTI were also down, but trading at above $20 per barrel. Meanwhile, Brent Crude – the benchmark used by Europe and the rest of the world, which is already trading based on June contracts – was also weaker, down 8.9% at less than $26 a barrel.

Earlier this month, Opec members and its allies finally agreed a record deal to slash global output by about 10%. The deal was the largest cut in oil production ever to have been agreed.

In the United States and elsewhere, There will be further supply cuts as private sector producers respond to the low prices, but it’s hard to see that being on a sufficient scale to have a fundamental impact on the market.

There will be further supply cuts as private sector producers respond to the low prices, but it’s hard to see that being on a sufficient scale to have a fundamental impact on the market.