A record 160m barrels of oil has been stored in "supergiant" oil tankers outside the world's largest shipping ports following the deepest fall in oil demand in 25 years due to the coronavirus pandemic. Big oil producers have announced cutbacks in production in hopes of better balancing supplies with demand, but many analysts say it's not enough.
For the first time in history, oil futures have sunk well below zero.
Where it stands: The price of oil makes up more than 50% of the price of a gallon of gasoline, but it takes several days for changes in the global oil market to make it onto gas stations' billboards.
While the front month West Texas Intermediate crude oil futures are now trading under $8 a barrel as of roughly 1pm EST, the June contract, which traders and investors will need to move into is trading more than $14 higher, creating a massive spread, and a phenomenon known as contango, which often results from oversupply.
Oil traders usually play a game of pass the parcel with contracts for barrels of oil.
When a futures contract expires, traders must decide whether to take delivery or roll their positions into an upcoming contract.
The June WTI contract is trading more actively at a much higher level of $21.6 a barrel.
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It is also aimed at encouraging philanthropists and companies to contribute to the WHO's COVID-19 Solidarity Response Fund. It has also sent over a million COVID-19 diagnostic kits to 126 countries.
"For many investors or people using these contracts for hedging this is really a big pain", said Edward Moya, market analyst at OANDA in NY.
More lately, nations all over the world have tentatively eased up on business- shutdown restrictions put in place to gradual the unfold of the virus.
"Speculators having bought the June contract now risk that it could get pulled lower over the coming weeks towards where the May contract is currently trading", Hansen added. The U.S. oil hub in Cushing, Okla., had 55 million barrels of oil in storage as of Friday, the highest level since 2018.
In Tokyo the Nikkei 225 fell 1.1 per cent after Japan reported that its exports fell nearly 12 per cent in March from a 12 months earlier as the pandemic hammered demand in its two largest markets, the USA and China.
Crude stockpiles at Cushing rose 9 percent in the week to April 17, totalling around 61 million barrels, market analysts said, citing a Monday report from Genscape. An unprecedented output deal by OPEC and allied members a week ago to curb supply is proving too little too late in the face a one-third collapse in global demand. Given the shutdown to the USA economy, oil inventories in the United States could hit a new record high in May, exceeding the previous record of 1.374 billion barrels that was recorded in August/September 2016.
Worldwide oil consumption is roughly 100 million barrels a day, and supply generally stays in line with that. The oilfield engineering company said that the pandemic has created so much turmoil in the industry that it "cannot reasonably estimate" how long the hit will last.
The prices that went negative were WTI - the USA -based benchmark.