Intraday oil prices plummeted, and U.S. oil fell to a negative value in May. The lowest intraday reached $ -40.32 per barrel, the lowest level since the United States had crude oil trading data in 1946; WTI 5 Monthly crude oil futures settlement price is -37.63 US dollars per barrel, the first time in history to close at a negative value, down 55.9 US dollars, a decrease of 305.97%, which means that investors will receive cash for physical delivery of WTI crude oil in Cushing, Oklahoma; analysis The division said that this shows that there is no room to store crude oil. The reason for the plunge is that traders who are long on the May contract are eager to close their positions.
On Monday (April 20), oil prices plummeted, and U.S. oil fell to a negative value in May. The lowest intraday reached $ -40.32 per barrel, the lowest level since the United States had crude oil trading data in 1946 ; WTI May crude oil futures settlement price was Barrel-37.63 US dollars, the first time in history to close at a negative value, down 55.9 US dollars, a decrease of 305.97%, meaning that investors will receive cash for physical delivery of WTI crude oil in Cushing, Oklahoma.
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Of all the violent and unprecedented turbulence in the financial markets since the outbreak of the coronavirus, no one has been astonished as the performance of an important crude oil futures on Monday. The May West Texas Intermediate Oil (WTI) futures, which expires on Tuesday, fell to a negative range, with a settlement price of -37.63 US dollars, which means that the seller has to pay the buyer for its crude oil. The reason is that as the virus pandemic has brought the economy to a standstill, crude oil inventories have become very large, and there is little space left for American energy companies to store oil. If there is no place to store, then no one would want to hold a crude oil contract that is about to expire.
The settlement price of crude oil futures due one month later is $ 20.43 per barrel, highlighting investors ’concerns about insufficient oil storage capacity. The spread between the May contract and the June contract is the largest in history.
Michael Tran, Managing Director of Global Energy Strategy at RBC Capital Markets, said that there is little that can prevent the spot market from going further down the road in the short term. “Refineries are refusing to accept oil at a historic rate. As U.S. inventories quickly rise to their limits, Market forces will cause further pain until either the market falls to the bottom or the corona virus clears, it seems that the former will come first.
Since the beginning of this year, the corona virus outbreak and the previous OPEC+ Under the double blow of the collapse of the production cut agreement, oil prices plummeted. Due to the decline no end in sight, and production of crude oil around the world continue to produce, has not led to the reservoir
traders oil capacity at the cost of selling.
The extreme trend of oil prices also highlights the severity of oversupply in the US oil market. As governments around the world prolonged the blockade measures aimed at controlling the spread of the virus, industrial and economic activities almost stagnate. Although OPEC and its allies reached an unprecedented production cut agreement a week ago to control supply, in the face of a reduction in global crude oil demand of about one-third, the production cut is still too slow and too small.
Signs of weakness are everywhere. Even before Monday ’s crash, Texas buyers had bid for certain oils as low as $ 2 a barrel. In Asia, banks are increasingly reluctant to provide credit to commodity trading companies, fearing the risk of catastrophic default.
In the New York market, WTI crude oil fell to -40.32 US dollars per barrel in May. According to data from the Federal Reserve Bank of St. Louis, this is far below the lowest price since the end of World War II and since the continuous monthly data in 1946. Brent crude oil fell 8.9% to $ 25.57.
The financial blog Zero Hedge said that not only WTI crude oil fell to a negative value, but basically all US crude oil futures fell into the negative range.
Since the end of February, Cushing ’s crude oil inventories, an important U.S. oil storage hub and WTI crude oil delivery location, have jumped 48% to approximately 55 million barrels. According to the US Energy Information Administration, as of September 30 last year, Cushing’s effective storage capacity was 76 million barrels.
S & P Global Platts Energy Information analyst Chris Midgley pointed out that Cushing is an inland city, and the crude oil storage capacity is likely to fill up within 3 weeks. Once filled, it will be more difficult for WTI crude oil futures contracts to be physically delivered; The plunge, as traders were forced to close their long positions, so as to avoid buying physical crude without storage capacity.
Mizuho Futures Director Bob Yawger said that WTI crude oil futures fell to a negative value, this is a historic day. This shows that there is no space to store crude oil, which is basically washed away with water, and crude oil is worthless. The current situation is that the pipeline and inventory are full, but the strange thing is that the EIA data does not show that the current inventory of crude oil has reached the maximum energy storage. The reason for the plunge is that traders who are long May contracts are eager to close their positions.
According to people familiar with the matter, after crude oil prices turned negative, Saudi Arabia is considering cutting oil production as soon as possible, rather than in May; spurred by news, oil prices rose slightly, but the gains soon retreated. Analysts said that there are still many crude oils that are not needed by refineries at sea, and in the short term, there are no positive factors for the recovery of the crude oil market.
Some market commentators believe that the next settled crude oil futures contract is Brent crude oil June futures contract, which will be settled within 10 days. The current quotation is US $ 25.54 per barrel, or the next victim of the new coronary pneumonia epidemic, and may even fall to a negative value.
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