United States oil prices crashed to unprecedented lows Monday as futures in NY ended in negative territory for the first time amid a devastating supply glut that has forced traders to pay others to take the crude off their hands.
Meanwhile, the price of the European and worldwide benchmark, Brent Crude, only dropped by 8.9% to $25.57 a barrel. ConocoPhillips last week said it would cut its oil sands output by as much as 100,000 bpd.
"The May crude oil contract is going out not with a whimper, but a primal scream", said Daniel Yergin, a Pulitzer Prize-winning oil historian and vice chairman of IHS Markit Ltd.
"What it means is there's no available storage anymore so the price of the commodity is effectively worthless".
The global economic uncertainties have got people chasing the US dollar, which is driving the greenback higher even as the US Federal Reserve is in the midst of a massive quantitative easing to address the resulting liquidity crunch.
Traders are willing to pay someone else to take that oil for delivery in May and shift the burden of figuring out where to keep it.
USA crude oil prices plummeted sharply on Monday amid the COVID-19 pandemic, falling by almost 300% and turning negative for the first time in history while practically absent demand has pushed storage facilities to the extreme limits, reports NBC News.
"Traders have sent prices up and down on speculation, hopes, tweets and wishful thinking", said Louise Dickson, an oil markets analyst at Rystad Energy, a research and consulting firm.
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"The May contract has become rather illiquid because just ahead of the expiry and if we see the June contract which will kick over as the front-month contract by Wednesday, the prices are not that low".
Addressing reporters after the market close, President Donald Trump reiterated his promise to fill up the Strategic Petroleum Reserve, saying the U.S. would add as much as 75 million barrels of crude.
The benchmark USA crude price headed into the negatives for the first time ever on Monday, following a day of record declines.
"Never before has the oil industry come this close to testing its logistics capabilities to the limit", the agency said in its closely-watched Oil Market Report for April.
At 9.01am, the ringgit weakened to 4.3780/3880 against the USA dollar from 4.3700/3770 at yesterday's close. WTI Midland in Texas - a flagship marker for the USA shale industry - was at -$13.13 a barrel, while crude in Alaska was at -$46.63.
With that, expect fuel prices to go down within the next couple of months as well. Brent was trading at nearly $70 a barrel early this year.
The price of a barrel of crude is based on factors such as supply, demand and quality.
"Nobody wants to take delivery of oil next month because there's nowhere to store it, so the price dropped below zero", explained Rachel Winter, associate investment director at Killik & Co.