By Arré Bench Apr. 21, 2020
Market observers were in for another shock on Monday night, after the price of crude oil, dropped well below zero (-40 USD per barrel), leaving traders actually having to pay buyers to take the oil off their hands. How did this happen?
The coronavirus pandemic has led to many firsts — from a sudden lockdown on travel, to a staggering number of deaths across the world, there clearly hasn’t been much to look forward to.
Market observers were in for another shock on Monday night, after the price of the West Texas Intermediate, or best crude oil in the world, dropped well below zero (-40 USD per barrel), leaving traders actually having to pay buyers to take the oil off their hands.
“I’m not sure how to react to that other than say that nobody, whether they’re 120 years old or whether they’re 20 months old, has ever seen an oil price lower than this,” a market veteran in the US was quoted as saying on Monday, as the Covid-19 pandemic claimed another casualty.
I was there when oil WTI traded at a NEGATIVE -30 Dollars.
And was down -266% in a DAY
At a time when the whole world was in a lockdown due to a PANDEMIC
— Mihir Vora (@theMihirV) April 20, 2020
So how did this happen?
The answer is pretty straightforward — the demand for oil has obviously dropped ever since most parts of the world were placed under lockdown. The supply, meanwhile, considering wells are costly and cumbersome to shut down, is continuing as normal, with Saudi Arabia, Russia, and others producing more oil than the market can consume.
Today, #WTI crashed from an open of $17.85/ barrel to a low of -$40.32/ barrel.
What is going?
Oil storage tanks are full to the brim.
— Prof. Steve Hanke (@steve_hanke) April 20, 2020
The writing, however, has been on the wall for the last few months, as crude oil prices have consistently dropped, following a breakdown in the original OPEC (Organization of Petroleum Exporting Countries) agreement. This, compounded by the coronavirus pandemic, is the main reason for the jaw-dropping fall in prices.
A barrel of crude dropped lower than a 50lb bag of manure.
— Joe Borelli (@JoeBorelliNYC) April 20, 2020
A few social media users saw this fall as more proof that coronavirus is the most dangerous pandemic of our time, and needs to be taken more seriously.
You coulda traded a Filet-O-Fish today for a dozen barrels of oil, and they still think COVID is a New York hoax.
— Jeffrey Wright (@jfreewright) April 21, 2020
While others joked about trying to profit from the crash…
Anybody got a bigger truck that can help me out? I just bought 3,000,000 barrels of oil and I need help hauling it to my house.
— Larry The Cable Guy (@GitRDoneLarry) April 21, 2020
— Rohit Sajwan (@Pahadibhulaa) April 20, 2020
The fall was so shocking that it drew reactions from all quarters, including celebrity chef Martha Stewart, whose one word reaction went viral on Twitter.
— Martha Stewart (@MarthaStewart) April 22, 2013
Back home, however, a few observers have said not much would change for us…
🔸Crude: $108 /Barrel
🔸Petrol: ₹76 in Delhi
🔸Crude: $32 /Barrel
🔸Petrol: ₹72 in Delhi
🔸Crude: $0 /Barrel🙄
🔸Petrol: ₹70 in Delhi
Even if crude remains at 0, our PM CARES too much abt tax collection to make fuel cheaper for citizens#OilCrash
— Srivatsa (@srivatsayb) April 21, 2020
India's biggest import item just saw prices dip to zero. Why is the rupee getting weaker then?#OilCrash
— Madhavan Narayanan (@madversity) April 20, 2020
So clearly, how this fall will end up impacting the future is still unclear. What does seem to be getting clearer by the day, though, is that no one knows what surprises 2020 has in store for us anymore.