Crude Oil prices in the United States took a negative dive in the late hours of Monday April 20, as it plunged further to below $0 a barrel for the first time as the coronavirus pandemic lingers.
The development came against the backdrop of an 18-year low drop in prices amid storage challenges.
The development implies that oil producers are paying buyers to take the commodity off their hands over fears that storage capacity could run out in May.
As a result, oil firms have resorted to renting tankers to store the surplus supply and that has forced the price of U.S. oil into negative.
With hundreds of millions of people around the world staying at home to stop the spread of COVID-19, travel by car or plane is nearly nonexistent. Factor in a major lag in manufacturing and other economic activity that requires oil and the reasons for the dramatic crash become apparent. For those still traveling, it’s not uncommon to see gas prices under $1 per gallon at stations across the US these days, though it’s left those businesses hurting.
While the OPEC Plus countries, Saudi Arabia,Nigeria, Russia and other producers tried to prop up prices with a deal last week to slash production by 9.7 million barrels per day in May and June, the deepest cut ever negotiated. But that isn’t expected to soak up the supply glut caused by evaporating demand for energy.
The Nigeria crude traded at $12 and $13 per barrel between Monday and Friday.
The report came after traders gave account of how 10 million barrels of crude made available for sale in April were still unsold with another 60 million expected to hit the market in May.
The vast majority of unsold supplies are Nigerian, traders said, and the glut is made worse because of the drop in demand from traditional European buyers.
There are concerns that the development may pose challenges to Nigerian fiscal policymakers, as the nation struggles to address economic uncertainties. This is because the prevailing prices are well below the nation’s fiscal breakeven, assessed by Fitch Ratings at about $133 a barrel.
CNN reported that the June contract CLM20, 4.70%, which is the most actively traded ended down $4.60, or 18.3% at $20.03 a barrel.