US Oil price fell negative for the first time ever as its demand continues to drop amid the global pandemic COVID-19 crisis.
The price of America’s most closely watched oil benchmark crashed to as low as minus $37.63 a barrel. Stocks and Treasury yields also dropped on Wall Street, with the S&P 500 down 1.8%.
Oil traders are still paying $20.43 for a barrel of US oil set to be delivered in June. Analysts consider this price as the oil’s “true” price.
Traders are also facing challenges once crude is delivered next month. They don’t have enough places to keep it as storage tanks are close to full due to collapse in demand as factories, automobiles, and airplanes sit idled across the globe.
According to Chris Midgley, head of analytics at S&P Global Platts, tanks at a key energy hub in Oklahoma could hit their limits within three weeks.
As a result, traders are willing to pay others to take that oil for delivery in May off their hands, so long as they also make the burden of figuring out where to keep it.
“Almost by definition, crude oil has never fallen more than 100%, which is what happened today,” said Dave Ernsberger, global head of pricing and market insight at S&P Global Platts.
“I don’t think any of us can really believe what we saw today,” he said. “This kind of rewrites the economics of oil trading.”
Also read: “Quarantine violator” shot by guard in Bacolod
Oil price down to negative for the first time in history
Brent crude, the international standard, fell nearly 9% to $25.57 per barrel.
The plunge in oil sent energy stocks in the S&P 500 to a 3.7% loss, the latest in a dismal 2020 that has caused their prices to halve nearly.
Halliburton lurched between gains and sharp losses, even though it reported more robust results for the first three months of 2020 than analysts expected.
The oilfield engineering company said that the COVID-19 crisis severely hit the industry that it “cannot reasonably estimate” when will it end. It expects a further loss in revenue and profitability for the rest of 2020, specifically in North America.
The S&P 500 fell 51.40 points to 2,823.16. The Dow Jones Industrial Average lost 592.05 points, or 2.4%, to 23,650.44, and the Nasdaq dropped 89.41, or 1%, to 8,560.73.
“The government can declare whatever they want in terms of encouraging people to get out and do stuff,” said Willie Delwiche, investment strategist at Baird.
“Whether or not broad swaths of society do that remains to be seen. It’s going to take seeing people start to get out and do stuff again. That will be the necessary positive development, not just declaring getting things open.”