WTI crude price goes negative for the first time in history
HOUSTON – A perfect storm of weak demand, unbridled production by warring producers, and an exhaustion of storage capacity drove West Texas Intermediate crude to a negative price for the first time in history, closing at -$37.63/bbl.
Crude stockpiles at the Cushing pipeline hub in Oklahoma are reaching capacity, and many major pipeline operators are requiring shippers to prove their crude has a destination so that it will not strand the lines. Solutions being considered in Washington include utilizing the U.S. Strategic Petroleum Reserve as temporary storage, and deploying financial incentives to keep operators from producing and adding to the glut.
All this comes in the wake of the “OPEC++” deal, in which OPEC producers, its allies, and even competitors like the U.S., Mexico and Canada came together and agreed to a 9.7 MMbpd production cut. The amount of the cut is only about a third of global daily oversupply, however, and an agreement start date of May 1 has encouraged participants like Saudi Arabia to pump as fast as possible before the deal takes effect.
In addition to the above market factors, an expiry of May futures on Tuesday the 21st is playing a major role in the price crash, and indicate that this historic decline is more a creation of the market than one of actual demand. June futures remain positive for WTI, standing at $22.12 as of 12:50 pm U.S. Central time. Brent crude prices declined less dramatically, closing down $1.87 to $26.21, further suggesting that the WTI price crash will not persist over the coming days.
World Oil’s editorial team discusses the historic closing oil price, and how it will compel actions on a state, federal and international level, on the Daily Brief podcast: https://blubrry.com/worldoilsdailybrief/59125001/daily-brief-the-oil-industry-enters-day-one-of-the-negative-price-era/
