Prices for US crude contracts for May delivery are at their lowest in two decades
In a rare irony, the Canadian Canadian Select crude price fell below zero, in a precedent pointing to concerns over how full the tanks and pipes are globally full.
Today, US crude prices tumbled to their lowest levels in more than twenty years, with fears of global demand collapsing and global storage capacity running out.
Dr. Saleh Saadeh Al-Jalad, publisher of the weekly magazine Mays, said that negative prices in the oil market mean that oil producers will pay prices to reduce their total loss, which is in the interest of the buyer.
“The absorptive capacity to take the product is not present and thus it has entered into the negative area. The surplus state in the market will continue due to the fact that the decline in demand is much more than the decline in production agreed upon during the last OPEC + agreement. The main reason is the increase in supply and the current saturation status in the pipelines,” he added. And the stock that reached the highest operational level. In the event that the world cannot control Corona, which is the great basis for what happened, the situation will continue for a longer time. “
He added, “Negative prices will continue more than expected for many reasons, but you have flexibility in the Western systems and the incentives they use. We know that they are all private sectors, but there are incentives that will facilitate them to adapt to the situation they are today.”
Concern over storage capacity in the US Cushing caused a steeper decline in May-May contracts, which expire tomorrow, while NYMEX June delivery, which witnessed more active trading, fell by 6%.
The Organization of Petroleum Exporting Countries has indicated that the agreed production cut is not sufficient to compensate for the decline in global demand, with the closure continuing due to the outbreak of the Corona virus.
The US Energy Information Administration announced last week that its stockpiles of crude rose by more than 19 million barrels.