On Monday, oil prices plunged below zero as demand for energy collapses amid the coronavirus pandemic and traders don't want to get stuck owning crude with nowhere to store it.
For the first time in history US oil prices turned negative. West Texas Intermediate crude for May delivery shed more than 300 percent to settle at -37.63 USD per barrel on the New York Mercantile Exchange, Xinhua reported. According to The New York Times, the concerns have grown that storage tanks in the United States were near capacity and unable to hold all the unused crude.
The May benchmark fell into negative territory, suggesting people who had oil to sell were willing to pay to have it taken off their hands. The problem is that the US is running out of places to store its oil which is already being stockpiled on barges at sea, the Times reported.
With space to store oil scarce, US benchmark West Texas Intermediate for May delivery crashed 300 per cent on Monday and ended trading at -$37.63 a barrel.
The US light crude West Texas Intermediate (WTI) for May at New York Mercantile Exchange (NYMEX) was trading at -35.34 USD per barrel, down by -53.61 USD per barrel from the last closing of $18.27 per barrel. However, May delivery contract of WTI at NYMEX plunged to -40.32 USD per barrel during the trade on Monday.
At Multi Commodity Exchange (MCX), crude oil contract expiring on April 20 settled at Rs 965 per barrel, down by Rs 471 or 32.80 per cent from the previous session. The most active May contract also settled at Rs 1,755 per barrel, down by Rs 159 or 12.86 per cent from the last session.
The price of oil has now reached a point that it is increasingly becoming difficult for higher cost producers to remain in operation and rather look at declaring bankruptcy. A lot of US shale producers are in deep trouble and analysts expect that low oil price for few more months will result in a spate of bankruptcies in US.
(Inputs from Agencies)