NEW YORK: US oil prices crashed to unprecedented lows Monday as futures in New York ended in negative territory for the first time amid a devastating supply glut that has forced traders to pay others to take the commodity.
With space to store oil scarce, US benchmark West Texas Intermediate for May delivery ended trading at $37.63 a barrel ahead of Tuesday’s close for futures contracts when traders who buy and sell the commodity for profit would have had to take physical possession of it.
The remarkable decline comes as the petroleum industry emerges as one of the corners of the global economy made most vulnerable by government shutdowns to limit the spread of coronavirus.
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The commodity has been further weakened by a battle for market share that raged much of the spring between Saudi Arabia and Russia
A deal announced last week between OPEC and its peers to cut production by about 10 million barrels per-day from May appears not to have been enough, while the closely-monitored storage capacity at Cushing, Oklahoma was almost full as of Monday morning.
It’s a dump at all cost as no one… wants delivery of oil, with Cushing storage facilities filling by the minute,” AxiCorp’s Stephen Innes said.
“It hasn’t taken long for the market to recognize that the OPEC+ deal will not, in its present form, be enough to balance oil markets.”
Still, Smith noted that Monday’s negative price only affects oil deliveries due Tuesday.
US oil futures for delivery in May also fell sharply, by 18 percent, but finished at $20.43 per barrel.