Today marked a strange milestone for oil prices.
For the first time in the history of trading, oil producers are now paying buyers to take the resource of their hands.
The move comes as demand for oil has effectively dried up during the coronavirus pandemic. Because oil fields have continued to produce oil despite the withering demand, oil producers have been forced to store more oil than ever, at a mounting cost.
The catastrophic drop in price of oil signals that it is now costs more to store oil than the oil is worth.
Futures trading contracts for oil are up tomorrow, meaning that if those who own the futures can’t sell them, they will take over the cost of storing the oil – hence the mass offloading of futures today (21 April).
During the bizarre and unprecedented drop on Monday evening, the price of a barrel of West Texas Intermediate oil, the benchmark for US oil, fell as low as -$37.63 a barrel.
Earlier this month, OPEC nations agreed a landmark deal to reduce oil production by 10%. However, this slowdown has not been enough to match the steep decline in demand.
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