Historical Decline In Oil Price : Negative Rate Reached in US Due to Overflow Situation

Historical Decline In Oil Price : Negative Rate Reached in US Due to Overflow Situation

Historical Decline In Oil Price : Negative Rate Reached in US Due to Overflow Situation

Monday was the worst day ever for US benchmark crude West Texas Intermediate (WTI). Crude oil prices witnessed the biggest drop in history. WTI futures reached an all-time low of $ 3.70 per barrel on Monday. This was due to the huge reduction in demand for crude oil.

Reduction in demand for oil due to Corona crisis

The world is currently battling the Coronavirus epidemic. Lockdowns are announced in different parts of the world to avoid corona. Factories are closed due to lockdown and traffic facilities are also closed. Therefore, due to the decrease in the consumption of oil around the world, the demand for crude oil has also come down drastically.

Oil overflow situation in America

In fact, the United States has in a way exceeded its reserves of crude oil. The storage facilities there have reached their full capacity. According to Chris M., Chief Analyst at S&P Global Platts, all crude oil tanks will be filled within three weeks. In such a situation, it is necessary to clear the existing reserves for oil production.

The negative rate reached for the first time

On one hand, there is no space left for the US to keep the oil. On the other hand, due to dwindling demand due to the Coronavirus crisis, no businessman is currently in a position to buy crude oil and keep it with him. Because of this, shares in Wall Street also fell in later afternoon trading. The S&P 500 lost 0.9 percent. But most of the drama took place in the crude oil market, where the price of May delivery US crude fell below zero ie -3.70 $ / barrel. This is the first time that the price of US crude has gone negative.

Offers $ 3.70 per barrel with crude oil

Actually, Tuesday is the last day for the May delivery deal, and traders had to pay and take delivery. But due to lack of demand and the problem of keeping crude oil, no one is willing to take delivery. Even those who have crude oil are offering that customers buy crude oil from them. They will also give him a sum of $ 3.70 per barrel.

This fall is for the month of May

The price of US crude has undoubtedly reached minus for the first time in history, but let me tell you here that the decline is only for the month of May. In fact, May 21 is the last day of the oil deal for the delivery of the month of May, but on Tuesday there was a huge drop in oil prices due to no expected oil demand. You can understand this in such a way that a shopkeeper will make the goods cheaper to clear his stock.

- Amit Choudhary

To get notified for such more articles, Subscribe us. If you want your article to get published on this blog, submit it here.