For the first time since West Texas Intermediate entered the commodity market in 1983, crude oil futures fell below $0. The record low was previously $10.20 on March 31, 1986.
Gas prices have been dropping over the last few months, as coronavirus quarantine made this normal everyday necessity a non-essential purchase. Gasoline is so cheap at the pump right now, we only wish we could take advantage of it.
No matter how cheap gas gets, most of the world has only very limited use for it right now.
Only essential travel is allowed all around the world so most personal vehicles are parked most of the time. They’re not using gasoline and don’t need oil while they sit.
May Futures Contract on Crude Oil Expiring Today
Part of the drastic crude price drop on Monday can be blamed on the May futures contract, which expires on Tuesday.
Those trading today on the May contract are expected to take physical possession of the oil while there is no demand for it, which is why commodity traders are avoiding oil, particularly today.
Buying barrels of crude oil today would be quite a gamble.
Nowhere to Store Crude Oil
Oil storage tanks are also filling up because refineries have no reason to rush to make gasoline. However, many crude oil producers are still operating as shutting down a well is very expensive and isn’t an easy endeavor.
There is nowhere to store all of this crude oil, no demand for it and it keeps on coming. This makes commodity traders nervous.
How Long Can These Conditions Continue?
Oil stocks are also down, but the drop is not as severe as the commodity because investors expect coronavirus and the global quarantines to end at some point and oil prices to rebound then. But not until.
The big question is when and how long the wells can keep running with no demand.