US Oil Prices Crash Into Negative Territory As Country Battles Coronavirus

In early March, it’s safe to say that no one would have expected this grim scenario to hit oil investors in America.

Past midnight (GMT+8) on Tuesday (21 Apr), oil barrels traded for ludicrous future prices of under US$0/barrel, as demand waned despite President Trump’s attempt to barter a new deal with OPEC.

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As oil future prices continued to plummet, the lowest recorded figure was -US$37.63/barrel (S$53.48/barrel), reports CNN.

For context, CNN explains that this is the lowest price since US began trading in oil futures 37 years ago — aka since 1983.

Why did oil prices plummet suddenly?

Scrutinising the numbers a little closer, we can see that America’s historic oil price crash was long foreshadowed by plummeting prices this past week.

Headlines on international news outlets – though overshadowed by Covid-19 news reports – have talked about US oil prices falling to US$15/barrel and even US$11/barrel, prior to last night’s crash.

However, prices of oil futures aren’t expected to affect consumer prices.

Lack of demand, coupled with no space to store surplus oil

The main reason the shocking price drop can also be chalked up to a severe lack in demand for oil in general. With the Covid-19 pandemic, non-essential travel has essentially been on lockdown — subtracting the need for airplanes, cars, trains and buses to clock overtime.

Traders who’ve been hoarding oil stock have been running out of space to store their excess supply as a result, according to Financial Times.

This could possibly explain the scenario we’re witnessing in US’s oil market, with worried investors deciding to let go of their barrels before prices crash further.

America has close to 800k Covid-19 cases

Based on 21 Apr figures, the United States (US) has close to 800,000 Covid-19 cases & accumulated a death toll of 42,486 across 52 states.

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In other words, it’s still not looking too great as the coronavirus continues to leave its mark on American households & businesses.

But for better or for worse, President Trump has announced that he’ll be looking to partially reopen certain states by the end of the month.

Living in unprecedented times

We truly live in unprecedented times, and we’re not sure what other records will see new highs or lows in the near future.

However, we hope that oil futures will resume a semblance of stability soon as our increasingly interconnected world means that any price fluctuations will probably have spillover effects on all of us.

Featured image adapted from Newsweek.