(Photo by Reuters/Nick Oxford)
US oil futures plunged below zero for the first time in history on Monday due to a worldwide glut as demand collapses amid the pandemic. This means oil producers are paying buyers to take the commodity off their hands.
The price of a barrel of West Texas Intermediate (WTI), the benchmark for US oil, fell as low as minus $37.63 a barrel. US oil prices recovered on Tuesday to trade in positive territory.
Brent crude, the global benchmark for oil, is trading around $26 a barrel, having plummeted by as much as 70 percent since the start of January as coronavirus lockdowns have destroyed global demand in crude.
“At a minimum, oil prices will be the last asset class to recover from lockdown. End transport demand will only occur in the final stages of reopening when border crossing is allowed, and travel restrictions get lifted,” said Stephen Innes of AxiCorp.
Shares fell in Tokyo, Hong Kong and Shanghai but New York stock futures edged higher after the S&P 500 sank 1.8% overnight, giving up some big gains from last week.
US President Donald Trump has said the government will buy oil for the country’s national reserve. But concern continues to mount that storage facilities in the US will run out of capacity, with stockpiles at Cushing, the main delivery point in the US for oil, rising almost 50% since the start of March, according to ANZ Bank.
Recently, countries around the world have started to gradually ease up on business-shutdown restrictions. But health experts warn the pandemic is far from over and new flareups could ignite if governments allow a premature rush to “normal” life. The S&P 500 remains nearly 17% below its record high as millions more U.S. workers file for unemployment every week amid the shutdowns.