Oil prices in the United States dropped below zero into the negative for the first time in history as producers cannot find any space to store the massive excess leftover from the covid-19 pandemic.
In the space of just a few hours, the price of oil dropped from $18 a barrel to -(minus)$38 a barrel. This has led to crude oil producers paying buyers to take oil off their hands – an incredible scenario.
Demand for oil has fallen to its lowest point in 25 years due to people staying at home during the coronavirus breakout. This has led to millions of barrels of oil being stored in oil tankers around the world’s largest shipping ports.
The head of oil at research firm Rysatd Energy, Bjornar Tonhaugen, said the imbalance between global supply and demand has led to an unprecedented situation. He said:
“As production continues relatively unscathed, storages are filling up by the day. The world is using less and less oil and producers now feel how this translates.”
It is expected that global oil prices will recover in the second half of this year as tighter global restrictions regarding travel are lifted and the demand for oil rises again.
The biggest oil-producing nations in the world have agreed to hold back up to 20 million barrels of oil per day from May, with many companies shutting their oil wells for the time being.
Source: The Guardian