NEW YORK – West Texas Intermediate for May delivery plunged a record 305 percent to $-37.63 per barrel on Monday, marking the first time that the price of North America’s benchmark crude has sunk into negative territory.
At the close of trading on the New York Mercantile Exchange (NYMEX), May futures contracts for WTI crude, which expire on Tuesday, fell by an unprecedented $55.90 compared with Friday’s settlement price of $18.27 as buyers fled that oil in droves due to uncertainty about where it could be stored and started focusing on the next month’s contract.
The decline in the price of crude for June delivery fell by 18 percent, or $4.60 a barrel, to $20.43 per barrel amid expectations of an economic rebound and far higher demand relative to May.
The price gap between the May and June futures contracts, known as the front month and second month, is currently the widest in history, according to Jeff Kilburg of Chicago-based asset management firm KKM Financial.
“This is a phenomenon due to the expiration of the front month contract, coupled with the historic plunge in crude,” he told financial television network CNBC in an e-mail.
For his part, Edward Moya, senior market analyst at New York-based foreign exchange dealer Oanda Corporation, said the collapse in the price of crude on Monday was primarily a reflection of the fact that no one wants to take delivery of May WTI crude contracts because storage capacity is running out amid weak demand stemming from the coronavirus-related lockdowns.
Efforts by governments worldwide to mitigate the impact of the COVID-19 pandemic have dealt an enormous blow to economic activity worldwide and led to sharply lower demand for crude oil.
Even though the Organization of the Petroleum Exporting Countries (OPEC) and allied producers reached a historic deal earlier this month to cut production by 9.7 million barrels a day (roughly 10 percent of global output) starting May 1, many analysts say that will not be enough to make up for the demand shortfall until there is a resumption of normal economic activity.