In a truly bizarre turn of events, crude oil has dropped below $0 for the first time in history. Over the course of the day, traders watched as WTI crude oil crashed during its trading session, falling to $15 per barrel, and then $11, before finally giving out and turning negative. It is now so bad that traders are willing to pay for oil to be taken off their hands.
At its peak, oil futures contracts for May were trading at -$40.32 per barrel, before ending the trading day at -$37.63. This is a 306% drop in price.
The biggest factor affecting oil right now, as I stated before, is the lack of global demand. Oil consumption has fallen 30%, due to the fact that planes are stranded, and all forms of travel is restricted. And now, due to the lack of demand, traders are left with a large excess supply with nowhere to store it, and thus are trying to dump it as fast as possible. The main storage facilities for oil, which are in Cushing, Oklahoma, are fearful that they will run out of storage. The amount of oil stored there rose 9% in the past week, equalling to about 61 million barrels in total.
It is estimated that there are currently 160 million barrels of oil sitting in storage tankers around the world, due to the fact that refiners are not processing said oil.
Despite this drastic plunge, it is does not seem like traders think this will be an extended issue, as prices for the June delivery contract were more normal comparatively, with only a 14% drop, down to $21.32 per barrel.
Comparatively, prices for Brent crude also fell, but was nowhere near as bad as crude, because storage for it is more readily available.
When asked about the price drop in oil, US President Donald Trump said that it was a short term drop and that more production cuts were needed. He also said that the US government was looking into buying 75 million barrels of oil while the price was low, in order to place in strategic petroleum reserves.
Usually for consumers, a price drop in oil means lower prices for petrol. However, with this current price crash, it is unclear just how consumer prices will be affected.
We talked about the oil crash as it was happening, last night on our YouTube livestream. You can watch it below, or join us every day at 10.00am GMT and ask us questions.