Oil markets entered uncharted territory on Monday, as prices fell 306-percent. At one point, West Texas Intermediate Crude for May delivery was trading at a *negative* 36.73 a barrel, meaning producers were paying to get the oil off their hands...
"So that means there's not a place for the oil that's coming due at the end of this futures contract... and it just reflects the current supply-demand dynamics in Texas and the US and globally because of the coronavirus."
Oil economist Karr Ingham is the Executive VP of the Texas Alliance of Energy Producers. He says the negative price was caused by a quirk in the system.
"The June futures price is up around 22-dollars, which is not great but it's better than negative-38 by a country mile or two. And so a lot of this has to do with the fact that that May contract expires tomorrow (Tuesday)."
The problem is there is no place to store it...
"The demand for crude oil and energy products has just collapsed because we've shut down the Texas economy, the Houston economy, the global economy, the US economy; we're not flying, we're not driving, we are not demanding transportation fuel..."
Ingham says the price drop has more to do with COVID-19 and decreased demand than the recent infighting among the world's oil producers...
"Make no mistake about it; the OPEC cuts, the OPEC-plus cuts that were announced were a big deal. They are beneficial; and just because prices are lower now than they were when that deal was announced doesn't mean that's not a big deal and a helpful deal."
"What the market recognizes though is that - let's just roundly call it 10-million barrels a day that OPEC-plus is going to take off the table in terms of current production - still doesn't push production down far enough to align with the current state of demand."
Analysts predict drivers will see gas prices at 20-year lows in the coming weeks.