Today, the US oil market has witnessed history as the coronavirus pandemic caused prices to fall below $0 per barrel. This happened for the first time in history. US oil prices fell below $ 0 per barrel on Monday 20th of April and they spiraled into negative numbers.
In a historical crash, oil futures opened at the lowest level since 1983. Experts have warned that oil prices may fall to negative values.,For many companies preparing to ship crude oil to refineries, this concern has become a reality. The drop in oil prices actually means that the company has started paying customers to take it away. Why is this happening? With demand depleting during the coronavirus pandemic, we no longer have enough storage for oil. These concerns finally surfaced on Monday. The price of West Texas Intermediate Crude Oil (WTI), the benchmark for US oil, fell to minus 37.63 dollars per barrel. WTI prices also fell in June, but the transaction price was higher than $ 20 per barrel.
Benchmark Brent Crude
At the same time, the benchmark Brent crude used in Europe and the rest of the world also weakened. The value falling 8.9% to below US $ 26 per barrel. The oil industry has been struggling with sluggish demand and producers fighting for production cuts. Earlier this month, OPEC members and their allies finally reached a record agreement to cut global production by about 10%. The deal is the largest oil production reduction agreement ever. But some analysts say the reduction is not enough to make a difference.
Stephen Innes, chief global market strategist at Axicorp, said: “The market soon realized that the OPEC + transaction in its current form is not sufficient to balance the oil market.”
Major exporters-OPEC and Russia and other allies have already Agree on a record level of production cuts. In the United States and elsewhere, oil producers have made business decisions to cut production.
However, there is still more crude oil in the world that cannot be used. It’s not only about whether we can use it. It also depends on whether we can store it until the locking measures are sufficiently relieved to generate additional demand for petroleum products.