On Tuesday, oil prices briefly bounced back into positive territory. It was before dropping back below zero following the historic price rout on Monday.
Moreover, at one point in the morning, trading WTI crude was selling at $0.10 per barrel. It was before it fell back to negative territory by early morning United States time, at $-6 per barrel.
Brent crude is the global benchmark price for oil. The oil market’s woes spread outside the United States. Thus, the price for oil was down to $16.40 a barrel.
Thus, in recent weeks oil demand has evaporated. It is partly because the coronavirus pandemic caused the global shutdown.
One analyst said that they are not dealing with demand destruction at that point. Instead, they are facing demand disappearance.
On Tuesday, prices of the United States oil prices briefly climbed back above zero. It was before it dropped back into negative territory. It was following Monday’s historic plunge into negative rates, for the first time in history.
West Texas Intermediate oil is the benchmark for the United States crude prices. In European morning trading, it was at one point worth $0.10. It was before falling once again.
On Monday, it was seen well above the bottom of $-40 per barrel by 7.22 a.m. ET, WTI was at $6 per barrel. Nonetheless, it is still almost unprecedented in a territory.
Brent crude is the global benchmark price for oil. On Tuesday morning, it was down to $16.59 a barrel. It was because the market’s woes spread outside the United States.
Significant producers of oil now must pay buyers to take oil off their hands. That is what price dropping into negative territory means. That reflects a lack of storage space in the United States for oil. Moreover, it is reflecting the evaporation of demand in markets amid the global coronavirus shutdown.
Tuesday is the deadline for trading for WTI oil’s May futures contracts. It means that anyone who holds a deal after this point must take delivery of the physical product. Leading to the historic plunge, traders scrambled to offload their contracts, with little storage available.
Moreover, after OPEC and its allies agreed to the biggest-ever production cut, the price of oil has continued to slide. The agreement was intended to backstop prices. The novel coronavirus pandemic keeps society operating normally. Thus, investors are remaining unconvinced that the cuts can offset cratering demand for the commodity.
On Monday, the immensely volatile commodity had a historic plunge in pricing. It was when its May contract for United States West Texas Intermediate oil, the benchmark for United States crude prices, fell to its lowest-ever record. The negative price was at -$40.32 per barrel. It was a vicious signal for energy companies in these times.
West Texas Intermediate cure for May delivery traded at significant discounts to longer-dated contracts. According to Bloomberg, that dynamic plays out a worry that a key storage hub in Oklahoma, Cushing, is nearing capacity.
Analysts quickly commented on Monday’s historically significant moves. One of them said that it is a wake-up call for markets.