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Dublin: 11 °C Tuesday 7 July, 2020

The price of oil has plummeted to less than zero dollars a barrel

Storage space for oil is now running out, which precipitated today’s steep dive.

A gas station worker of Mexico Oil as the price of oil reached a record low.
A gas station worker of Mexico Oil as the price of oil reached a record low.
Image: Eyepix/ABACA

US OIL PRICES have crashed to an unprecedented low, falling to less than zero cent a barrel amid an epic supply surplus caused largely by the coronavirus pandemic affecting demand.

After beating the record low multiple times, West Texas Intermediate (WTI) for May delivery continued to sink to the unheard of price of a penny a barrel, before inching up to $0.27 at about 7.15pm Irish time in New York.

By the time markets closed, WTI put the price of oil at minus $37.63 a barrel.

Sellers of the May contract have just one more day to find buyers, but with storage in short supply, they are struggling to find takers.

The WTI contract for June delivery is trading at a still low $22 a barrel.

“It’s a contract for something that nobody wants to buy,” said Matt Smith of ClipperData.

The remarkable decline comes as the petroleum industry emerges as one of the corners of the global economy made most vulnerable by government shutdowns to limit the spread of coronavirus.

The commodity has been further weakened by a battle for market share that raged much of the spring between Saudi Arabia and Russia.

A deal announced last week between OPEC and its peers to cut production by about 10 million barrels per-day from May appears not to have been enough, while the closely-monitored storage capacity at Cushing, Oklahoma was almost full as of this morning.

“It’s a dump at all cost as no one… wants delivery of oil, with Cushing storage facilities filling by the minute,” AxiCorp’s Stephen Innes said.

“It hasn’t taken long for the market to recognize that the OPEC+ deal will not, in its present form, be enough to balance oil markets.”

Still, Smith noted that today’s negative price only affects oil deliveries due Tuesday.

US oil futures for delivery in May also fell sharply, by 18 percent, but finished at $20.43 per barrel.

- with reporting from AFP

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