- Oil prices rebounded briefly in positive territory on Tuesday before falling below zero after Monday’s historic price rout.
- Crude WTI sold at $ 0.10 a barrel at one point in the morning, before falling back into negative territory at -6 $ a barrel early in the United States.
- Crude oil Brent, the world benchmark oil price, fell to $ 16.40 a barrel as oil market problems spread outside the United States.
- Oil demand has evaporated in recent weeks, in part due to the global shutdown caused by the coronavirus pandemic.
- “We are not dealing with the destruction of demand at this stage, we are facing the disappearance of demand,” said an analyst.
- Follow the price of oil live on Markets Insider.
US oil prices briefly climbed above zero Tuesday, before falling back into negative territory after Monday’s historic drop in negative prices for the first time in history.
West Texas Intermediate oil, the benchmark for US crude prices, was worth $ 0.10 in European morning trading at one point, before falling again.
At 7:22 a.m.ET, the WTI was at -6 $ per barrel, well above the low of -40 $ per barrel observed on Monday, but still in almost unprecedented territory.
Crude oil Brent, the world’s benchmark oil price, fell to $ 16.59 a barrel Tuesday morning as oil market problems spread outside the United States.
The price of oil falling into negative territory means that the main oil producers must now pay buyers to remove the oil from them. This reflects the evaporation of market demand in the midst of the global closure of the coronaviruses and the lack of storage space in the United States for petroleum.
Tuesday marks the last trading day for the May WTI oil futures, which means that anyone holding a contract after this point is forced to take delivery of the physical product. With little storage available, traders rushed to unload their contracts, which led to the historic plunge.
Oil prices continued to drop even after OPEC and its allies agreed to the largest production decline ever – one intended to support prices. Investors are still not convinced that the cuts can offset the growing demand for this product, as the new coronavirus pandemic is preventing the company from functioning normally.
On Monday, the highly volatile product experienced a historic price drop when its May contract for US oil West Texas Intermediate, the benchmark for US crude prices, fell to its lowest negative price record at -40, $ 32 a barrel, a vicious signal for energy companies in these times.
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WTI crude for May delivery was traded at significant discounts on longer-term contracts. According to Bloomberg, this dynamic is set in the concern that a key storage hub in Cushing, Oklahoma, is approaching its capacity.
“We are dealing with the destruction of demand”
Analysts were quick to comment on the historic significance of Monday’s moves, one describing the unprecedented drop in prices as a “wake-up call” for the markets.
“Yesterday was a wake-up call and investors would be wary of ignoring the fact that the low level of oil means lower inflation, higher defaults, lower growth and more political instability, because less Petrodollars circulate in the system, “said Gregory Perdon, co-director of investments at Arbuthnot Latham, in a note.
Alexis Weakley, a public relations specialist at Refinitiv, fixed the fly at an excess supply imbalance. “The floating storage stack. The lack of cuts in OPEC + production over time. Texas growers were hoping for relief with a proposed state reduction. The answer was too simple to use the offer. simple fundamentals. ”
“Oil prices are at these low levels due to a complete cessation of demand,” she said. “We are not dealing with the destruction of demand at this stage, we are faced with the disappearance of demand. “