The U.S. crude oil futures have recently dropped below $0 and turned negative for the 1st time in history due to the coronavirus pandemic that has hindered its demand. The price was settled at minus $37.63 per barrel, as traders paid to supply the oil to the market. Additionally, Brent crude contract also slumped; however, more storage of this oil is available across the globe.

The global supply glut for crude oil is due to the rising acceptance of social distancing guidelines to curb the spread of the deadly coronavirus. Traders recently left the oil futures contract of May in a frenzy due to the non-availability of space to store the crude oil. However, the June West Texas Intermediate was settled at a higher level of $20.43 per barrel.

The May WTI contract for crude oil fell by 306% or $55.90 to settle at a discount of $37.63 per barrel as it touched an all-time drop of -$40.32 per barrel. Brent crude was down by 9% or $2.51 after settling at $25.57 per barrel. Refiners are currently processing less crude oil than usual, leading to a large number of barrels gushing into the storage facilities worldwide. There is also a surge in demand for vessels from traders to store the excess oil, which leads to a record of 160 million barrels in tankers globally. U.S. Cushing crude oil stockpiles reportedly increased 9% in the third week of April, totaling nearly 61 million barrels.

The lack of demand for actual oil has led the investors to leave the May contract ahead of time. When the contract expires, the traders will need to decide whether to roll into futures contracts for later months or take the delivery of the oil. Since the beginning of 2020, the Brent crude oil prices have dropped nearly 60%, while U.S. crude oil futures have collapsed nearly 130% to the level far below the break-even costs that are necessary for several shale drillers. This has led to drastic budget cuts and drilling halts.

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https://in.reuters.com/article/us-global-oil/u-s-oil-falls-more-than-10-to-lows-not-seen-since-1999-idINKBN2210V9?il=0