US oil prices rebound into positive territory after historic crash
US crude oil has bounced back into positive territory after plunging into negative territory for the first time, as the coronavirus outbreak crushes demand.
The US oil benchmark – West Texas Intermediate (WTI) – was at $1.43 a barrel in afternoon trading in Asia after starting the session at minus $14. It means producers were paying buyers to take oil given the limited storage in the US.
The expiry of the May WTI future today, which would force contract holders to take barrels of oil with nowhere to store it, prompted a rush of sellers. It drove the price of US crude to as low as minus $37.
Oil prices have plunged in recent weeks as travel restrictions and lockdowns curb global fuel use, with demand down 30 per cent. It has resulted in a glut of oil with storage space becoming harder to find.
The main US storage hub in Cushing, Oklahoma, the delivery point for the WTI contract, is now expected to be full within weeks.
The historic fall into negative territory unnerved investors triggering a drop in Asian markets. Japan’s Nikkei Index and Hong Kong’s Hang Seng were both down nearly two per cent. The Shanghai Composite was down 0.95 per cent.
Following the collapse in prices, US President Donald Trump said his administration was considering halting Saudi crude oil in a bid to help the US drilling industry.
Opec and its allies including Russia agreed to cut output by 9.7m barrels per day last week. However investors and analysts have said the cut does not go far enough to restore market balance.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “With mounting worries that the global capacity to store tens of million barrels of extra oil per day is diminishing at an alarming pace, nothing less than a full halt in oil production would give a meaningful sigh of relief to this market.”