On April 20, 2020, following the expiration of May futures contracts for US West Texas Intermediate (WTI) crude oil, the price of the main US oil benchmark fell more than $50/barrel, ending in the negative for the first time in history. Brent crude oil, the other international standard for crude oil prices, also dropped more than 26% to its lowest point since 2002.
The coronavirus (COVID-19) pandemic and subsequent lockdown measures have severely decreased global demand for oil, and despite a deal from OPEC+ countries to cut production, there is an international shortage of storage capacity for the excess oil. The negative oil prices indicate that producers had to pay buyers to take the oil off their hands, due to the lack of capacity to store it.
It remains to be seen if oil prices will recover in the coming months given the ongoing slump in demand and lack of storage capacity.
Click here to read our Insight on Production Rates, Risks, and Responses in the Petroleum Industry.
