- Summary:
- Crude oil price on the May WTI contract plunges into record negative territory as storage facilities for crude oil run out across the globe.
The May WTI crude oil price contract has expired worthless and is now trading at -$37 as at the time of writing, as a lack of new storage facilities has overrun the consumption utilization of the product.
Crude oil price on the WTI contract fell off the cliff in the late New York session, with the crude oil price on the WTI May contract, plunging to all-time lows of $-37.60 a barrel. However, the June contract which begins tomorrow continues to trade at $22 per barrel, a little lower than the Brent crude benchmark.
The trigger for the collapse of the WTI May contract is the lack of demand for crude oil price, which has led to storage facilities being used up to hold produced stocks. As at late last month, analysts had predicted that at the current rates of production and storage, facilities to store unutilized product would be driven to maximum capacity by the 3rd week of April and this seems to have been the case here. The OPEC + deal has not taken effect yet; it is still scheduled for commencement in May. It is unclear what the bloc’s response to the situation will be.
A negative price for WTI crude may mean that producers will now have to pay buyers to take the product off their hands, which will likely cause cessation of exploration activities in countries where refining capacities are minimal (Venezuela, Nigeria). This may make the OPEC + deal a non-event.
Countries like Saudi Arabia and Russia boast of impressive refining capacities and may not feel the price pinch that much.
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Technical Outlook for Crude Oil Price
The May contract for crude oil price on WTI is ending today. It is best to wait until the June contract kicks in before analysts can get an idea of price direction, especially as current price is in a region so uncharted that it is difficult to predict price direction or targets.