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They Can't Give It Away - U.S. Crude Price Turns Negative for First Time

Published 04/20/2020, 02:34 PM
Updated 04/20/2020, 03:34 PM
© Reuters.

By Barani Krishnan - U.S. crude prices turned negative the first time in history on Monday, with virtually zero buyers turning up for prompt delivery oil in a market woefully glutted by the coronavirus pandemic.

West Texas Intermediate crude futures for May delivery fell to a session low of minus $40.32 per barrel and settled the day at minus $37.63. That meant a notional loss of $55.90 per barrel from its Friday settlement of $18.27.

June WTI, which is already quoting as reference for U.S. crude given its outsize volume to May, settled at $20.43 per barrel, down $4.60 or 18.4% from Friday’s settlement.

Brent, the London-traded global benchmark for crude, meanwhile, lost $2.51 on its front month June contract to settle down 9% at $25.57. June Brent was at a contango, or discount, of more than $4 to July Brent.  Even more important, its differential to WTI — a big trade in oil — was at an unimaginable $63.

“I am worried about the dislocation of the WTI - Brent spread,” Igor Windisch of the IBW Daily Oil Brief said in a note Monday. “The worrying thing is that there is no support line for Brent.”

Since WTI futures began trading on the New York Mercantile Exchange in April 1983, the lowest the U.S. crude benchmark had gotten to prior to this was $9.75 in April 1986.

“What this tells you is that there’s just a mega glut of oil out there, that’s not going to be clearing anytime soon,” said John Kilduff,  founding partner at New York energy hedge fund Again Capital.

“As a matter of fact, we have a big problem on our hands in terms of storage,” Kilduff added. “The storage situation is filling up and refiners aren’t buying, motorists aren’t buying. nobody is buying; so there’s just a tremendous back up of crude oil throughout the system and you have to pay dearly now if you want somebody to take it off your hands.”

Amid the Covid-19 pandemic that’s destroying demand for oil faster than producers can cut, the market has been laser-focused on how much storage is left globally for crude and whether that will run out soon. 

According to known data, storage at the Cushing, Okla. hub for WTI deliveries reached 71% of working capacity as of April 10 — up 15% from two weeks earlier. 

At the rate Cushing is building, an average of 16 million barrels weekly over the past three weeks, analysts say the hub could hit capacity by mid-May, or the first few weeks of June, at the latest.

Oil storage on sea is growing too. Global crude tankers are estimated to hold a record high of 160 million barrels, double from just two weeks ago. 

Rystad Energy in Oslo, Norway, has estimated previously that U.S. storage capacity by end-April could drop to as little as 200 million barrels on paper, although in practice, available crude capacity might be closer to 150 million barrels.

“As storage fills up, countries are being forced to shut-in production on a large scale to counteract a theoretical oversupply of 21 million bpd in 2Q20,” Teodora Cowie, senior analyst at Rystad, wrote in a note Monday.

The story isn’t over yet for May WTI, which is only expiring Tuesday. It  has to converge with physical oil in the market, whatever that trades by Tuesday’s close. That leaves to anyone’s imagination what May’s final price would be. And whatever that it is, it will have an immense impact on June WTI, which becomes the front month from Wednesday.

Latest comments

2020, the only time where you can trade a McDonalds meal for a barrel of oil. LOL
Hey California, I know u ppl miss Barry Obama $6.00 per gallon
He'll, I'd take $10.00 per gallon if there was somewhere to go
Supply and demand,,,just like crazy Obama and Bush said about oil, gas , whatever..
He gas station owners, that $1.68 is going to get you 0 business..Try .99 for 87 octane.
Barani, ir seems strange to me that WTI went negative and oil companies, XOM for example, share price fell only 4.7% in the day. Do you have an explanation for this?
Trump pull out
So much for peak oil. Another in an endless string of epic fail leftist doomsday models.
are we filling up gas tank for free soon?
or pay the consumer to fill her up!
Imagine a world where an empty 55-gallon drum is more valuable than one filled with oil. And then short OIL; with all the money you make, fill your backyard with empty 55- gallon drums! But rent them out; don’t buy any oil!
The oil companies didn't seem to care when oil was over $100. TO BAD !!! Eat the hard times!!! After fleecing Americans for 100 years, I Think Rockefeller's have plenty of money to keep the oil companies afloat.
Boy am I glad Congress stopped Drumpf from filling the Strategic Petroleum Reserve at $30 a barrel.  Thank you Speaker Pelosi!
Did the oil industry care when struggling truckers were forced to choose between providing for their family and filling the tank?  ***them.
Just leave it to a Democrat to take credit for something completely coincidental that they had nothing to do with. Skeletor Pelosi is controlled by her hate of Trump.. it obvious in everything she does.
LOL Because the Drumpf cult NEVER does that!
about June contract the price is 21$, and May contrct 0$, can anyone explain what price it should be the wti price tomorow?
no capacity to store the crude.
June futures is the two benchmark after may goes off. deliveries have been made and after June 1st deliveries will occur again. If no demand and no storage available unsure of where price could go.
I will be creating a Gas Station Index Fund
Ready to short it
I am going to start a 55-gallon drum rental business!
Figuring out the weight >>>>>ElementPercent rangeCarbon83 to 85%Hydrogen10 to 14%Nitrogen0.1 to 2%Oxygen0.05 to 1.5%Sulfur0.05 to 6.0%Metals< 0.1%
a consensus of scientists said oil came from dinosaurs? we should have ran out by now. fossil fools?
Yep... It isn't going to be ending anytime soonWe have been fooled once again
fillerup none of that unleaded garbage either
what will happen after this
Put a Tiger in your tank. Esso gasoline 93 octane .32 plus a free cars wash
And a free dinner plate with a fill up.
The Saudis and Russians have serious problems. You all act like it's Disneyland over there. American oil boys sitting idle will fare better than those guys making squat per barrel. Watch & learn.
The Saudis and Russians have serious problems. You all act like it's Disneyland over there. American oil boys sitting idle will fare better than those guys making squat per barrel. Watch & learn grasshoppers.
Trump's golden touch strikes again. I'm so tired of winning
you can pay me to take a few barrels, ill put it in my yard and dance in it beverly hillbilly style
Right. Can't give it away they say, yet I wasn't even asked. :D
how much would it be at the pump?
good news for China.
and Europe. bad for middle east, russia and america.
oil price will only back up after some big US oil producers bankrupt. and the oil price will only go back to 30-40 max. because that is the cost of US and Russia. Saudi is at around 15-18.
Trump gets my vote now, 100%
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