For the First Time in History, Crude Oil Prices Fall Below Zero. How Many More Shocks Will 2020 Bring?

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For the First Time in History, Crude Oil Prices Fall Below Zero. How Many More Shocks Will 2020 Bring?

crudeoil
Illustration: Robin Chakraborty

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.

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.

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 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.

While others joked about trying to profit from the crash…

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.

Back home, however, a few observers have said not much would change for us…

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.

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