- Oil prices in the US plunged to below zero
- A barrel of crude oil in New York dropped from $18.27 (€16.80) to negative $37.63 (€34)
- The price of US crude oil has never fallen below $10
NEW YORK, (CNB News) – The American oil industry is facing a doomsday scenario.The coronavirus pandemic has caused oil demand to drop so rapidly that the world is running out of room to store barrels. At the same time, Russia and Saudi Arabia flooded the world with excess supply.
Oil prices in the US plunged to below zero on Monday as demand collapsed amid the coronavirus pandemic.
A barrel of crude oil in New York dropped from $18.27 (€16.80) on Friday evening to negative $37.63 (€34) on Monday. At the start of the year, a barrel of oil was $60 (€55) for comparison.
The international standard Brent Crude was still trading at $26 (€24).
The price of US crude oil has never fallen below $10 but several analysts say the situation should improve.
The decline was in part due to the end of trading for May delivery. Investors sought to get rid of barrels of crude oil left due to an unprecedented drop in demand.
“It is a bit misleading to focus on the May contract,” said Matt Smith, an oil market expert for ClipperData told AFP. “There are many more exchanges on the barrel for delivery in June”.
US oil barrels for June delivery also dropped, but not as dramatically, falling 18% on Monday to finish at $20.43 (€18.81).
The oil market has been experiencing sharp decreases for weeks due to travel restrictions in many countries. As governments have stopped economic activity in their countries, demand has dropped significantly.
The market was also inundated with low-cost oil after Saudi Arabia launched a price war with Russia.
The two countries put an end to the dispute earlier this month by agreeing to reduce production by nearly 10 million barrels per day to stimulate markets.
But prices continued to plummet when it became clear that the promised reductions would not be enough to offset the collapse in demand.