June oil futures crash as market grapples with unprecedented glut
Prices for June oil contracts dramatically crashed this evening as the market faces the prospect of massive oversupply amid plunging demand.
The price for a June West Texas Intermediate (WTI) crude future contract fell below $10 (£8.14) this evening, following yesterday’s drastic crash of May WTI contracts.
Yesterday, May WTI future contracts went negative for the first time in history, with traders paying others to take the oil off their hands.
Oil futures are contracts to actually deliver the commodity in question to a specific location for a specific date.
Yesterday’s price action came about because the WTI May contract expires today, meaning that anyone in possession of a contract would have to take delivery of the commodity at the main WTI storage facility at Cushing in Oklahoma on the set day in May.
Normally, if traders do not want to take delivery, they can simply sell the contract or roll it over to the next month.
However, because of the enormous supply glut and rapidly growing shortage of storage space, no one wanted to buy up the contracts – leading to a situation where traders were being paid up to $37 to take them on.
Now June contracts have joined the rout as traders face the prospect of low demand, dwindling storage space and massive oversupply.
US President Donald Trump earlier today called for a bail out of the struggling US oil industry which faces devastation following the price crash.
“We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!” Trump said on Twitter.