Oil benchmark as it crashes below $0 per barrel
On Monday, the soon-to-expire May contract made history for the U.S. oil benchmark as it finished in the negative territory. This means that the investors will most likely be paying their buyers to get their delivery for crude oil which is caused due to the increase in the drilling of crude oil and the lack of storing it.
The May delivery for West Texas International (WTI) finished down at 55.09 dollars at the negative 37.63 dollars per barrel. This May contract will expire on Tuesday.
This one-day plunge marks the largest record since 1983 as well as being the lowest level for any contract till now as per Dow Jones Market Data.
This huge discount for the May contracts versus the June contact is a reflection of the supply and demand drivers that are currently in place. As for the other delivery contracts for WTI, they traded at the higher prices as compared to the May contracts.
In the latest update related to the crude oil price decrease, Donald Trump said that the US is now looking to add about 75 million barrels of oil to their Strategic Petroleum Reserve. Trump said that he is considering this move based on low prices of oil and that this action of his will top out.
Trump, speaking at the press briefing held in White House said, “We will get it for the right price.”
This sharp decrease in demand for crude oil is a result of the coronavirus outbreak as well as the price war of crude oil between Russia and Saudi Arabia.
Trump also said that he would like that the Congress will approve this action. Congress, in the last month, left their plans for buying oil for SPR from the 2 trillion dollars stimulus package.
Trump called this negative oil price to be a short-term phenomenon as he said, “This is a great time for buying oil and we would appreciate if the Congress approve of this. He also said that at the minimum, the government would be charging for the storage of oil in reserve.