US oil prices crashed to unprecedented lows Monday as futures in New York ended in negative territory for the first time amid a devastating supply glut that has forced traders to pay others to take the crude off their hands.
With space to store oil scarce, US benchmark West Texas Intermediate for May delivery closed at -$37.63 a barrel.
The futures contract for May closes Tuesday, meaning traders who buy and sell the commodity for profit needed to find someone to take physical possession of the oil. But with the glut in markets and storage facilities full, buyers were scarce.
“It’s a contract for something that nobody wants to buy,” said Matt Smith of ClipperData.
Cratering oil prices prompted more selling on Wall Street, which was slowly creeping back up after the coronavirus pandemic battered the major indices.
US stocks opened lower and stayed that way all day, with the Dow petering out to post a 2.4 percent decline.
The chaos in the oil market comes as the petroleum industry emerges as one of the corners of the global economy made most vulnerable by government shutdowns to limit the spread of coronavirus.
The commodity has been further weakened by a battle for market share that raged much of the spring between Saudi Arabia and Russia.
A deal announced last week between OPEC and independent producers to cut output by about 10 million barrels per day starting in May appears not to have been enough to buoy prices, while the closely-monitored storage capacity at Cushing, Oklahoma was almost full as of Monday morning.
“It’s a dump at all cost as no one… wants delivery of oil, with Cushing storage facilities filling by the minute,” AxiCorp’s Stephen Innes said.
“It hasn’t taken long for the market to recognize that the OPEC+ deal will not, in its present form, be enough to balance oil markets.”
Still, Smith noted Monday’s negative price only affects oil deliveries due Tuesday.
US oil futures for delivery in June also fell sharply, dropping 18 percent, but finished at $20.43 a barrel.
The European benchmark contract, London Brent North Sea oil for June delivery, ended down nine percent at $25.57 a barrel.
“This moment is of course historical and could not better illustrate the price-utopia that the market has been in since March, when the full scale of the oversupply problem started to become evident,” said Rystad Energy’s Oil Markets Analyst Louise Dickson.