{"id":158967,"date":"2020-04-27T12:01:05","date_gmt":"2020-04-27T11:01:05","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=158967"},"modified":"2020-04-26T05:03:21","modified_gmt":"2020-04-26T04:03:21","slug":"oil-plunges-below-zero-for-first-time-in-unprecedented-wipeout","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2020\/04\/oil-plunges-below-zero-for-first-time-in-unprecedented-wipeout\/","title":{"rendered":"Oil Plunges below Zero for First Time in Unprecedented Wipeout"},"content":{"rendered":"<ul class=\"abstract-v2\">\n<li class=\"abstract-v2__item\">\n<div class=\"abstract-v2__item-text\"><em>U.S. crude trades at lowest level in data going back to 1946<\/em><\/div>\n<\/li>\n<li class=\"abstract-v2__item\">\n<div class=\"abstract-v2__item-text\"><em>Crude in U.S. trades more than <span class=\"\" data-value=\"40\" data-original=\"$40\" data-symbol=\"$\">$40<\/span> below zero at lowest level<\/em><\/div>\n<\/li>\n<\/ul>\n<p><em>20 Apr 2020 &#8211; <\/em>Of all the wild, unprecedented swings in financial markets since the coronavirus pandemic broke out, none has been more jaw-dropping than today\u2019s collapse in a key segment of U.S. oil trading.<\/p>\n<aside class=\"inline-newsletter\" data-state=\"ready\"><\/aside>\n<p>The price on the futures contract for West Texas crude that is due to expire Tuesday fell into <span id=\"188c7046-8349-11ea-a4a9-308d99724420\">negative territory<\/span> &#8212; minus <span class=\"\" data-value=\"37.63\" data-original=\"$37.63\" data-symbol=\"$\">$37.63<\/span> a barrel. The reason: with the pandemic bringing the economy to a standstill, there is so much unused oil sloshing around that American energy companies have run out of room to store it. And if there\u2019s no place to put the oil, no one wants a crude contract that is about to come due.<\/p>\n<p>Underscoring just how acute the concern is over the lack of immediate storage space, the price on the futures contract due a month later settled at <span class=\"\" data-value=\"20.43\" data-original=\"$20.43\" data-symbol=\"$\">$20.43<\/span> per barrel. That gap between the two contracts is by far the biggest ever.<\/p>\n<p>\u201cThe May crude oil contract is going out not with a whimper, but a primal scream,\u201d said Daniel Yergin, a Pulitzer Prize-winning oil historian and vice chairman of IHS Markit Ltd.<\/p>\n<figure id=\"8358\" class=\"figure-expandable\" data-align=\"center\" data-id=\"361427459\" data-image-size=\"full\" data-image-type=\"chart\" data-type=\"image\">\n<div class=\"image\" tabindex=\"0\" role=\"button\" aria-label=\"Open image in viewer\">\n<div id=\"lazy-img-361427459\" class=\"lazy-img\"><img decoding=\"async\" class=\"lazy-img__image loaded aligncenter\" src=\"https:\/\/assets.bwbx.io\/images\/users\/iqjWHBFdfxIU\/ipKTPgrgPn_k\/v2\/pidjEfPlU1QWZop3vfGKsrX.ke8XuWirGYh1PKgEw44kE\/620x-1.png\" alt=\"WTI traded in negative territory for the first time\" data-native-src=\"https:\/\/assets.bwbx.io\/images\/users\/iqjWHBFdfxIU\/ipKTPgrgPn_k\/v2\/pidjEfPlU1QWZop3vfGKsrX.ke8XuWirGYh1PKgEw44kE\/-1x-1.png\" data-img-type=\"chart\" \/><\/div>\n<\/div>\n<\/figure>\n<p>\u201cThere is little to prevent the physical market from the further acute downside path over the near term,\u201d said Michael Tran, managing director of global energy strategy at RBC Capital Markets. \u201cRefiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.\u201d<\/p>\n<p>Since the start of the year, oil prices have plunged after the compounding impacts of the coronavirus and a breakdown in the original OPEC+ agreement. With no end in sight, and producers around the world continuing to pump, that\u2019s causing a fire-sale among traders who don\u2019t have access to storage.<\/p>\n<p>The extreme move showed just how oversupplied the U.S. oil market has become with industrial and economic activity grinding to a halt as governments around the globe extend shutdowns due to the swift spread of the coronavirus. An unprecedented output deal by OPEC and allied members a week ago to curb supply is proving too little too late in the face a one-third collapse in global demand.<\/p>\n<p>There are signs of weakness everywhere. Even before Monday\u2019s plunge, <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-04-17\/texas-oil-at-2-a-barrel-raises-specter-of-negative-prices\" title=\"Texas Oil at &lt;span class='usd-convert-currency currency-swap' data-value='2' data-original='$2' data-symbol='$'&gt;$2&lt;\/span&gt; a Barrel Raises Specter of Negative Prices\"  target=\"_blank\" rel=\"noopener noreferrer\">buyers in Texas <\/a>were offering as little as <span class=\"\" data-value=\"2\" data-original=\"$2\" data-symbol=\"$\">$2<\/span> a barrel last week for some oil streams. In Asia, bankers are increasingly <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-04-18\/fearful-bankers-spurn-asia-commodity-traders-in-credit-squeeze\" title=\"Fearful Banks Spurn Asia Commodity Traders in Credit Squeeze (2)\"  target=\"_blank\" rel=\"noopener noreferrer\">reluctant<\/a> to give commodity traders the credit to survive as lenders grow ever more fearful about the risk of a catastrophic default.<\/p>\n<p>In New York, West Texas Intermediate for May delivery dropped as low as negative <span class=\"\" data-value=\"40.32\" data-original=\"$40.32\" data-symbol=\"$\">$40.32<\/span> a barrel. It\u2019s far below the lowest level previous seen in continuation monthly data charts since 1946, just after World War II, according to data from the Federal Reserve Bank of St. Louis. Brent declined 8.9% to <span class=\"\" data-value=\"25.57\" data-original=\"$25.57\" data-symbol=\"$\">$25.57<\/span> a barrel.<\/p>\n<p>Crude stockpiles at Cushing &#8212; America\u2019s key storage hub and delivery point of the West Texas Intermediate contract &#8212; have jumped 48% to almost 55 million barrels since the end of February. The hub had <a href=\"https:\/\/www.eia.gov\/petroleum\/storagecapacity\/table1.pdf\" title=\"External Link\"  target=\"_blank\" rel=\"nofollow noopener noreferrer\">working storage capacity<\/a> of 76 million as of Sept. 30, according to the Energy Information Administration.<\/p>\n<h3 id=\"fund-inflow\">Fund Inflow<\/h3>\n<p>Despite the weakness in headline prices, retail investors are continuing to <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-04-17\/bottom-hunting-retail-investors-launch-into-etf-buying-spree\" title=\"Bottom Hunting: Retail Investors On an Oil ETF Buying Spree (1)\"  target=\"_blank\" rel=\"noopener noreferrer\">plow<\/a> money back into oil futures. The U.S. Oil Fund ETF saw a record <span class=\"\" data-value=\"552000000\" data-original=\"$552 million\" data-symbol=\"$\">$552 million<\/span> come in on Friday, taking total inflows last week to <span class=\"\" data-value=\"1600000000\" data-original=\"$1.6 billion\" data-symbol=\"$\">$1.6 billion<\/span>.<\/p>\n<p>The price collapse is reverberating across the oil industry. Crude explorers <a href=\"https:\/\/www.bloomberg.com\/news\/terminal\/Q8Y246DWX2Q4\" class=\"terminal-news-story\" title=\"Oil Drillers Have Now Shut More Than One-Third of U.S. Rigs (1)\"  target=\"_blank\" rel=\"noopener noreferrer\">shut down<\/a> 13% of the American drilling fleet last week. While production cuts in the country are gaining pace, it isn\u2019t happening quickly enough to avoid storage filling to maximum levels, said Paul Horsnell, head of commodities at Standard Chartered.<\/p>\n<p>\u201dThe background psychology right now is just massively bearish,\u201d Michael Lynch, president of Strategic Energy &amp; Economic Research Inc said in a phone interview. \u201cPeople are concerned that we are going to see so much build up of inventory that it\u2019s going to be very difficult to fix in the near term and there is going to be a lot distressed cargoes on the market. People are trying to get rid of the oil and there are no buyers.\u201d<\/p>\n<p>_______________________________________________<\/p>\n<table>\n<colgroup>\n<col class=\"news-rsf-table-string\" \/><\/colgroup>\n<tbody>\n<tr>\n<td class=\"news-rsf-table-string\">\n<ul>\n<li><a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-04-20\/oil-for-june-still-costs-more-than-20-showing-market-disparity\" title=\"Oil for June Still Costs More Than $20, Showing Market Disparity\"  target=\"_blank\" rel=\"noopener noreferrer\">Oil for June Still Costs More Than $20, Showing Market Disparity<\/a><\/li>\n<li><a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-04-20\/oil-is-trading-below-zero-across-the-u-s-as-market-craters\" title=\"Oil Is Trading Below Zero Across U.S. as Futures Market Craters\"  target=\"_blank\" rel=\"noopener noreferrer\">Oil Is Trading Below Zero Across U.S. as Futures Market Craters<\/a><\/li>\n<li><a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-04-20\/the-oil-price-crash-in-one-word-inelasticity\" title=\"The Oil Price Crash in One Word: \u2018Inelasticity\u2019\"  target=\"_blank\" rel=\"noopener noreferrer\">The Oil Price Crash in One Word: \u2018Inelasticity\u2019<\/a><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><em>\u2014 With assistance by Javier Blas, and Elizabeth Low<\/em><\/p>\n<p><a target=\"_blank\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-04-19\/oil-drops-to-18-year-low-on-global-demand-crunch-storage-woes\" >Go to Original &#8211; bloomberg.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>20 Apr 2020 &#8211; Of all the wild, unprecedented swings in financial markets since the coronavirus pandemic broke out, none has been more jaw-dropping than today\u2019s collapse in a key segment of U.S. oil trading:<br \/>\n* U.S. crude trades at lowest level in data going back to 1946.<br \/>\n* Crude in U.S. trades more than $40 below zero at lowest level.<\/p>\n","protected":false},"author":4,"featured_media":158968,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[146],"tags":[1441,232,1829,1868,562,504,116,754,1921,339,75],"class_list":["post-158967","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","tag-big-oil","tag-capitalism","tag-coronavirus","tag-covid-19","tag-finance","tag-international-relations","tag-market","tag-oil","tag-opec","tag-trade","tag-world"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/158967","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=158967"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/158967\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media\/158968"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=158967"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=158967"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=158967"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}