US crude oil fell to zero for the first time in history as stockpiles overwhelmed storage facilities, before rebounding to just over $1 on Tuesday 21 April.
On Monday, the price of US crude oil crashed from $18 a barrel to -$38 in a matter of hours, as rising stockpiles of crude threatened to overwhelm storage facilities and forced oil producers to pay buyers to take the barrels they could not store.
The market crash underlined the impact of the coronavirus outbreak on oil demand as the global economy slumps.
The US oil market – known in the industry as the West Texas Intermediate price – is expected to trade above $20 a barrel this week, recovering from its slump into negative territory. The international oil price benchmark, known as Brent crude, is trading at around $26 a barrel.
The recovery is expected to pick up over the second half of the year as tight restrictions on travel to help curb the spread of the virus are lifted, raising demand for fuels and oil. At the same time supply is expected to dwindle due to the historic deal to limit oil production and the financial collapse of weaker oil companies.
However, most analysts believe that oil prices will fail to reach the same price levels recorded at the beginning of the year before the outbreak. Brent crude reached highs of almost $69 a barrel in January before plummeting to less than $23 a barrel at the end of March. Many market experts predict the price of Brent will remain below $50 a barrel this year.
Oil producers have continued to pump near-record levels of crude into the global market even as analysts warned that the impact of the coronavirus outbreak would drive oil demand to its lowest levels since 1995. The emergence of negative oil prices is expected to prompt some oil companies to hasten the shutdown of their rigs and oil wells to avoid plunging deeper into debt or bankruptcy.
The collapse will come as a blow to US President Donald Trump who took credit for brokering a historic deal between the Opec oil cartel and the world’s largest oil producing nations to limit the flood of oil production into the market. The pact to cut between 10 million and 20 million barrels of oil from the market from next month was dismissed by many within the market as “too little, too late” to avoid a market crash.
Giant oil tankers are being used to hold record amounts of crude at sea due to a global oversupply that threatens to overwhelm the world’s storage facilities. Shipping experts told the Reuters news agency that 60 supertankers have been chartered to store oil, mostly off the coast of Singapore and in the US gulf coast, as well as smaller crude oil tankers.