UPDATE: US oil crashes below $1, lowest ever

The United States crude futures fell below $1 per barrel for the first time ever as demand for crude dried up. The U.S. crude futures for May delivery, the near-term contract, fell to their lowest level of more than 136% to negative $6.72 a barrel as traders fretted over the capacity of storage facilities both in the U.S. and abroad. Contracts for June delivery declined 12% to about $22 a barrel.

Brent also declined by 6.5% when it closed at $26.22 but that contract was nowhere near weak because more storage is available worldwide

Meanwhile oil prices have plunged since the beginning of the year after the compounding impacts of the coronavirus and a breakdown in the original OPEC+ agreement. With no end in sight, and producers around the world continuing to pump, that’s causing a fire-sale among traders who don’t have access to storage.

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The historic low price reflects uncertainty about what buyers would even do with a barrel of crude in the near term. Refineries, storage facilities, pipelines and even ocean tankers have filled up rapidly since billions of people around the world began sheltering in place to slow the spread of the deadly coronavirus.

Why the plunge in US crude futures price?
According to Forbes, Head of Oil & Gas Research, Renaissance Capital, Alexander Burgansky, said, “The matter comes down to the way that WTI futures contracts work and the lack of oil storage capacity available in Cushing Oklahoma.

“WTI May-dated futures contracts, which expire Tuesday, require futures buyers to take delivery of the oil in Cushing. But given that there is little if any storage space available in that location the traders are ditching their contracts.Oil traders are selling tomorrow’s futures to avoid taking a physical delivery,” Burgansky said.

Instead, traders are now buying June-dated contracts, which recently were fetching approximately $23 a barrel.

In the most actively traded U.S. futures contract, crude for June delivery closed Monday at about $21, while oil due to be delivered to the main U.S. trading hub in Oklahoma in November ended at around $32.