Because storing oil costs more than the oil itself, traders are paying to get rid of their futures.
Monday marked the first time that one month's storage costs exceeded the spot price of oil.
Commodity analysts call it "Contango" when oil for delivery in the future costs more than oil for immediate delivery.
The pandemic has hit U.S. oil producers harder than their peers because the domestic oil supply is landlocked.
Unlike Brent crude - a waterborne oil delivered by producers to the North Sea - WTI is traded through Cushing, Okla. Because of the higher logistical barriers of transporting oil across land, West Texas oil trades at a discount to Brent, which fell by 9 percent to $25 a barrel Monday.
Shale producers lose money when the price of crude sinks below $50. Facing a protracted demand slump, high-cost producers will "Shut in" supply, closing oil wells until prices stabilize.
In the meantime we'll likely see consolidation in the oil industry as oil majors with healthy balance sheets buy up distressed shale assets.
https://www.nationalreview.com/2020/04/why-oil-prices-went-negative/
Monday marked the first time that one month's storage costs exceeded the spot price of oil.
Commodity analysts call it "Contango" when oil for delivery in the future costs more than oil for immediate delivery.
The pandemic has hit U.S. oil producers harder than their peers because the domestic oil supply is landlocked.
Unlike Brent crude - a waterborne oil delivered by producers to the North Sea - WTI is traded through Cushing, Okla. Because of the higher logistical barriers of transporting oil across land, West Texas oil trades at a discount to Brent, which fell by 9 percent to $25 a barrel Monday.
Shale producers lose money when the price of crude sinks below $50. Facing a protracted demand slump, high-cost producers will "Shut in" supply, closing oil wells until prices stabilize.
In the meantime we'll likely see consolidation in the oil industry as oil majors with healthy balance sheets buy up distressed shale assets.
https://www.nationalreview.com/2020/04/why-oil-prices-went-negative/
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