The US benchmark crude oil price collapsed on Monday, falling to one cent a barrel amid an epic supply glut caused largely by the coronavirus pandemic’s hit to demand.
After beating the record low multiple times, West Texas Intermediate (WTI) for May delivery continued to sink to the unheard of price of a penny a barrel, before inching up to $0.27 at about 1815 GMT in New York.
Sellers of the May contract have just one more day to find buyers, but with storage in short supply, they are struggling to find takers.
The WTI contract for June delivery is trading at a still low $22 a barrel.
The coronavirus pandemic has dealt a severe blow to economic activity around the globe and sapped demand for oil.
While OPEC and its oil-producing allies finalized a historic agreement earlier this month to cut production by 9.7 million barrels per day beginning May 1, many argue that it still won’t be enough to counter the fall-off in demand.
The COVID-19 outbreak has meant countries have effectively had to shut down, with many governments imposing restrictive measures on the daily lives of billions of people.
The lockdowns imposed in many of the world’s major economies have sent crude demand tumbling by as much as a third, leaving the industry facing what Jefferies analyst Jason Gammel called “the bleakest oil macro outlook” he had ever seen.
Not all oil contracts are trading in negative territory. Brent, the international benchmark, lost 9 per cent on Monday to fall to $26 a barrel, but is less immediately afflicted by storage issues.
Brent Crude is the benchmark for oil from countries like Nigeria.
Brent is a seaborne crude allowing traders to easily ship it to areas of higher demand. Amrita Sen at Energy Aspects said: “With Brent you can put it on ships and move it around the world immediately. Storage tanks at Cushing, however, will be full in May.”
With demand at near-paralysis, oil and fuel tanks around the world are close to brimming.