U.S. crude prices plunged to their lowest level in history on Monday as traders continue to fret over a slump in demand due to the coronavirus pandemic.
Starting at an already record low of below $5 late on Monday, the future contract prices started trading in the negative within the hour.
U.S. benchmark WTI oil price closed at -$37.63/barrel.
On Monday, a technical oddity exacerbated the price plunge as traders fled the May futures contract ahead of its expiration tomorrow (Tuesday).
The following month’s contract (June) fell 11 per cent to under $22.22 a barrecord.
At 1.44 EDT (9.44pm Dubai time, April 20, 2020), the West Texas Intermediate crude stood at $2.12.
Then WTI crude for May delivery tanked 94%, to $0.97, its lowest level on record.
It dropped even further to a ridiculous 20 cents/barrel before starting to trade in the negative
After beating the record low multiple times, West Texas Intermediate (WTI) for May delivery continued to sink to the unheard of price of a penny a barrel and below.
When a futures contract expires, traders must decide whether to take delivery or roll their positions into an upcoming contract.
Usually this process is relatively uncomplicated, but the May contract’s decline reflects worries that too much supply could hit the markets, with shipments out of OPEC nations booked in March set to cause a glut.
The June WTI contract is trading more actively at a much higher level of $21.6 a barrel.
The spread between May and June was more than $23, the widest in history for the two nearest monthly contracts.
Investors bailed out of the May contract ahead of expiry later on Monday because of lack of demand for the actual oil.
Analysts said this month’s agreement between OPEC and its peers to slash output by 10 million barrels a day was having little impact because of the virus lockdowns and travel restrictions that are keeping billions of people at home.