United States oil futures turned negative for the first time in history on April 20 as analysts warn that crude storage will fill to the brim by next month.
Meanwhile, US shale firms weigh the possibility of shutting down production.
There is more oil in the market due to a massive slump in demand amid coronavirus lockdowns around the world and storage for crude oil is running out.
“At one point it was -$37 a barrel,” Al Jazeera’s Andy Gallacher reports. “And some of the oil companies may not even survive this crash. Oil is traded on future contracts. Those current contracts run out on Tuesday and the traders no longer have anyone to sell that oil to. The problem is there’s nowhere to store it right now. There are even oil tankers out at sea that have nowhere to go.”
By turning negative, prices are signalling that traders are paying to have oil taken off their hands.
Brent crude, the global benchmark for oil, is trading around $26 a barrel, having plummeted by as much as 70 percent since the start of January as coronavirus lockdowns have destroyed global demand in crude.
Experts warn it will take a long time to draw down the oversupply, but US President Donald Trump says the collapse in prices is short term.
Oil prices were already down at the start of 2020 due to oversupply. An agreement on April 12 between major oil producing nations (OPEC+) to cut output by a record 10 percent could have some impact in May, but accounts for less than half of the current oversupply.
Oil market analysts say even those record-breaking curbs are simply not enough to salvage a market in unprecedented distress.
This report was produced and edited by Al Jazeera NewsFeed’s Hassan Ghani.
Source: Al Jazeera
