Oil prices go negative as demand dries up
April 21, 2020 - The price of U.S. benchmark crude fell below $0 a barrel due to a drop in demand caused by the coronavirus – the first time that the price on a futures contract for oil has gone negative, analysts say.
West Texas Intermediate crude briefly dropped as low as -$40 per barrel on Monday before closing at -$37.63.
The unprecedented event in energy markets reflects the fact that storage facilities are struggling to cope with the huge and sudden plunge in global demand, which is this month forecast to hit its lowest since the mid-90s. On Tuesday, the cost to have a barrel of U.S. crude delivered in May was at -$7.40 per barrel.
The severe drop on Monday was driven in part by a technicality of the global oil market. Oil is traded on its future price and May futures contracts are due to expire on Tuesday. Traders were keen to offload those holdings to avoid having to take delivery of the oil and incur storage costs, according to BBC News.