Crude Oil Price fell below zero, producers were forced to pay for the elimination of excess
US crude oil fell negative for the first time in history, as inventories were overwhelmed and rebounded to just over $1 on Tuesday
Oil prices in the United States were the first negative on Monday, as oil producers ran out of excess oil supplies caused by the coronavirus crisis, triggering a historic market collapse and plunging oil traders into trouble.
US crude prices fell from $18 to $38 a barrel in a few hours, as increased crude stocks could overwhelm storage facilities and force producers to pay buyers for barrels they could not store.
The market collapse highlighted the impact of the coronavirus outbreak on oil demand as a result of the global economic recession.
Prices rebounded above zero on Tuesday, the US benchmark West Texas in central New York after closing at -37.63 dollars on Monday, can change to $1.10 a barrel.
The rapid decline in recent weeks has boomed on Monday, as traders reached the last day of oil deliveries before the expiration of their May contracts. The agreements triggered a price collapse and desperate oil traders with more storage space were forced to act.
“The May crude contract is not a complaint, but an original cry,” said Daniel Jerkin, a Pulitzer oil historian.
Oil prices from the US shale center have been steadily declining in recent weeks, with the biggest drop in oil demand in 25 years due to travel restrictions to curb the spread of Covid-19. The decline accelerated and growing fears that the world economy might face the deepest recession since the Great Depression.
Oil-producing countries continue to import near-record levels of crude oil into the world market, although analysts warn that the effects of the coronavirus outbreak will bring oil demand to its lowest level since 1995. Negative oil prices are expected to encourage some oil companies to accelerate production closures in order to avoid falling into deeper debts or bankruptcy.
The collapse will be a blow to US President Donald Trump, who limits the flow of oil production to markets due to the historic agreement reached between the OPEC oil cartel and the world’s largest oil producer. Markets are considered “too little, too late” within many markets from next month to avoid market collapse.
Trump described negative prices as a “short-term problem” at the White House daily briefing. He said the United States is filling its strategic reserve: “If we can buy it in vain, we will take everything we can get.”