Crude oil prices plunged below zero for the first time in history on Monday, with traders actually paying to get barrels of the stuff off their hands as the coronavirus kills demand.
The May futures contract for West Texas Intermediate crude, which is set to expire Tuesday, settled at negative $37.63 per barrel — down $55.90 or more than 300 percent, on Monday afternoon.
That’s an indication that traders — in a bizarre scenario that’s unprecedented in the US energy markets going back to the end of World War II — were paying a stiff premium to get oil off their books as producers churn more fuel than the world can store.
“This has been in the making for weeks,” said Jan Stuart, Global Energy Economist at Cornerstone Macro. “The music has stopped and there’s nowhere to sit. This is one way for the market to ram the message home: ‘Dude, stop producing!’”
The below-zero contracts are deals to purchase oil due to be delivered next month. The June contract for US crude, meanwhile, held up better but still settled down 18 percent at $20.43 a barrel. And the June futures contract for Brent crude, the global benchmark, dropped 8.9 percent to $25.57 a barrel.
That low enough not only to idle production facilities but send some oil drillers — particularly US-based shale producers — into a financial tailspin.
While excess barrels are weighing down barges idled out at sea, tanks are full to the brim at key facilities across the US, traders said. That includes the country’s main storage hub and delivery point of Cushing, Oklahoma.
“If Cushing is full, that’s a disaster,” one energy trader told The Post, explaining that Cushing not only holds but moves oil through pipelines. “There has to be space open at Cushing for this market to function.”
Since the end of February, crude stockpiles at Cushing have soared nearly 50 percent to 55 million barrels, versus a working storage capacity of 76 million barrels as of Sept. 30, according to the Energy Information administration.
Oil prices have plunged in recent months as the coronavirus crisis led to global travel restrictions and caused demand for travel to evaporate. An international price war between Russia and Saudi Arabia exacerbated the situation by causing a glut of supply.
“Oil prices tend to be a gauge for the health of the global economy,” said Dan Russo, chief market strategist at Chaikin Analytics. “It’s difficult to be bullish on global economic growth with oil prices at multi-decade lows.”
The latest plunge came amid fears that an international deal to cut global oil production by 9.7 million barrels a day would be too little, too late to stabilize a market rattled by the virus crisis. Last week, US oil producers idled 13 percent of their rigs, but analysts said it wasn’t quick enough to keep the glut from getting worse.
The International Energy Agency has predicted demand for oil will plummet by 26 million barrels a day in May, while supply will fall by just 12 million barrels that month following the deal among Russia, Saudi Arabia and other countries.
With Post wires