US oil prices crashed into negative territory for the first time in history as the evaporation of demand caused by the coronavirus pandemic left the world awash with oil and not enough storage capacity — meaning producers are paying buyers to take it off their hands.
West Texas Intermediate, the US benchmark, traded as low as -$40.32 a barrel in a day of chaos in oil markets. The settlement price on Monday was -$37.63, compared to $18.27 on Friday. Traders capitulated in the face of limited access to storage capacity across the US, including the country’s main delivery point of Cushing, Oklahoma.
The collapse will be a blow to Donald Trump, who has gone to great lengths to protect the oil sector, including backing moves by Opec and Russia to cut production and pledging support for the industry.
The shale sector has transformed the US into the world’s largest oil producer in the past decade, giving the president a foreign policy tool he has brandished as “US energy dominance”, but which now faces a rapid decline. Negative prices are the latest indication of the depth of the crisis hitting the oil sector after lockdowns imposed in many of the world’s major economies have sent crude demand tumbling by as much as a third, leaving the industry facing what Jefferies analyst Jason Gammel called “the bleakest oil macro outlook” he had ever seen.