The downfall in global demand for oil led to an odd modification on Monday 20th April 2020. The prices of U.S. oil fell under zero for the first time in history and continued to decline. The leading U.S. oil scale, West Texas Intermediate, developed at negative $37.63.
Focused by an exchange agreement cut-off date, dealers, to a great extent, searched for purchasers for the containers of oil they usually hold in their records. Hence, it was difficult to find them and at that time as well after oil was being distributed for free.
As well numerous traders stood ready to pay for the delivery of oil at the cost of $37.63 as a replacement for buying oil.
The COVID-19 pandemic has harmed the global economy overall, leading to a drop in the demand for oil. The storage spaces for oil have also become a concern as well as formed an enormous oil surplus.
The downfall in oil pushes home the blunt drop in commercial movement globally due to this pandemic,” thought John Kilduff of Again Capital. “That places a reasonable point on what we are gazing down here.”
Experts believe that approximately 40 million Saudi Arabian oil barrels are coming towards the U.S. coasts, in addition to the tens of millions at present in storage there. That delivery “is perhaps going to be the last dagger in the heart of the U.S. shale oil business,” Kilduff stated.
At the beginning of 2020, West Texas Intermediates barrel priced nearly $60. Prices had fallen promptly due to the coronavirus, dropping down to approximately $18 a container on Friday, and forward of Monday’s immense dive.
The global economy has hit the brakes due to the fall in demand. That’s building an enormous excess of oil and floating worries about where actually to store it all.