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.
Trump threatens troop withdrawals if ‘very good deal’ on Greenland isn’t struck
House Dem back in the spotlight as brother faces up to 10 years in prison if convicted
Platner drops out of crucial Senate race after bombshell rape allegation torpedoes campaign
Franklin Graham Gives McDonald’s ‘Free Advice’ on How to ‘Bring Happy Customers Back’
Mike Rowe Sues Discovery for $2 Million in ‘Deadliest Catch’ Dispute
Erika’s Heartbreaking Reaction to a Woman She Saw in the Courtroom Crying Over Charlie’s Murder
Former Wisconsin Judge Who Was Convicted of Helping an Illegal Alien Evade ICE Gets Light Sentence
Bernie-backed socialist who allied with Platner could supplant him on ballot
WATCH: Dana White drops 2028 hints while raving about his favorite Trump cabinet secretary
Donald Trump sparks intrigue by ditching new Qatari jet for old Air Force One
Trump contemplates assassinating more Iranian leaders, warns he ‘may be gone too’ after topping Tehran’s ‘kill list’
Alleged Jan. 6 pipe bomber Brian Cole Jr.’s trial set for February
Three-time deported illegal immigrant charged with killing North Carolina girl, 6, after running stop sign
West Virginia town fires entire police force after chief resigns, sergeant alleges evidence room break-in
Doctors Issue Warnings as Popular Toy Inflicts Horrific Injuries on Kids
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.
