US oil prices plunged into negative territory for the first time ever on Monday, meaning producers are willing to pay buyers to take crude off their hands.
The price of America’s most closely watched oil benchmark crashed to as low as minus $37.63 a barrel, but how could this happen and, more importantly, why?
A benchmark price for American oil has dropped further and faster than at any other time in history, in response to the coronavirus pandemic.
West Texas Intermediate (WTI) was priced at over $50 a barrel before the outbreak but has dropped precipitously as global oil demand has fallen by as much as a third.
Flights have been cancelled, people are staying at home and large parts of the economy that use a lot of energy have shut down, all of which means less demand for oil.https://datawrapper.dwcdn.net/j5wbb/2/#amp=1
Oil supply, on the other hand, has not fallen as fast. Oil producing countries agreed earlier this month to collectively slash global output by an unprecedented 10 million barrels a day, or about 10 per cent.