Update: The May contract for U.S. West Texas intermediate crude oil (CL=F), which expires on Tuesday, erased all value and dropped below zero for the first time in history.
For decades, oil bears have made grand claims about oil prices crashing to $1. It was never really a claim that industry professionals would take seriously, with most observers viewing it either as fear-mongering or hyperbole.
On Monday the 20th of April 2020, WTI front-month contracts fell to the $1 handle. When you take into account both inflation and global breakeven prices – this truly is a historic day for oil. While some producers around the world – Saudi Arabia most notably – may claim to be able to produce oil at this price, the true breakeven price for every IOC and NOC globally is significantly above $1 and generally accepted to be $50+.
Some analysts have been calling for sub-$10 prices since the OPEC+ meeting was first announced. The fundamentals, they argued, were outside of the control of any oil cartel. Now, with no end in sight for the near-global quarantine caused by COVID-19 and oil storage nearing capacity, demand has all but dried up.
Violent Venezuelan gang exploits technology to turbocharge its dominance: experts
The Great Biden Coverup: Aides debated whether to put the president in a wheelchair
DHS chief Noem accuses lawmakers of ‘committing felonies’ at Newark ICE facility: ‘They should be censured’
Menendez brothers resentenced as experts blast ‘indefensible’ bid for killers’ freedom
Trump says he ‘figured out the system’ in lowering drug prices
Buttigieg says ‘right now I’m not running for anything’ during Iowa stop
House Republicans face down Dem attacks, protests to pull all-nighter on Trump’s ‘big, beautiful bill’
DNC Moves to Nullify David Hogg for Ballot Violation, Pelosi’s Daughter Steps In
GOP lawmakers target online pornography, propose interstate ban on obscene content
Minnesota Republican announces campaign for governor, vows to ‘fix’ what Tim Walz ‘broke’
Buttigieg to ‘assess’ 2028 presidential bid, he says ahead of veterans town hall
‘Completely Rigged’: Furious Fans Revolt Against the NBA as ‘Boycott’ Chatter Grows
Milwaukee County Judge Hannah Dugan indicted after allegedly helping illegal alien evade ICE
She Found Them: Gabbard Reportedly Fires Officials, ‘Deep State’ On Notice
Trump Uses Two of His Signature Songs to Make Entrance at Saudi Event
Meanwhile, some oil blends in Canada have fallen into negative territory, meaning producers would have to pay to give their barrels away.
While WTI for May delivery was down by over 90 percent, June delivery was only down 10 percent. Brent on the other hand, which is already trading on the June contract, is down by less than 6 percent, suggesting that it is fears of U.S. storage capacity that are dragging on prices.
It is unclear at this point just how low oil prices will fall or whether there is any intervention large enough to turn this around in the short term. Nymex CME will now allow traders to negatively price for May futures. The mid- to long-term impact on oil prices is likely to be equally catastrophic, with bankruptcies and financial ruin setting markets up for a supply shortage and dramatic price spike.
For everyone from oil companies to industry professionals and even gasoline consumers, a stable oil price is always preferable to volatility and rock-bottom prices.
Story cited here.
