On April 20, 2020, the price of US oil turned negative for the first time in history. The price of a barrel of West Texas Intermediate (WTI), the benchmark; for US oil, fell as low as minus $37.63 a barrel.
What does it mean?
It means oil producers or trades were paying buyers to take the commodity off their hands over fears that storage capacity could run out in May 2020.
Actually Crude Oil is traded on its future price and May 2020 futures contracts were to expire on April 21. Traders were keen to offload those holdings to avoid having to take delivery of the oil and incur storage costs.
The Covid-19 pandemic has cut oil demand by up to a third worldwide, which has turned the US oil market on its head. Continuous production but drying demand has left not storage capacity. Brent crude, the international benchmark, also slumped, but that contract was nowhere near as weak because more storage is available worldwide.
