Oil Market Crash: Prices plummet below $0 a barrel for crude oil — a record low.
On Monday, United States’ oil prices took a nosedive, falling below $0 to as low as $-37.63 a barrel at the end of the day. With the lowest value of the day being $-40.32, history was witnessed as that is the lowest level since New York Mercantile Exchange (NYMEX) began their oil futures trading in 1983.
Global demand is also projected to drop this month to levels so low that they were last witnessed in the mid 1990s.
HOW IT HAPPENED
The price of oil took a nosedive because only a small number of people are actually working outside their homes. Even much of the oil-consuming factories have shut down amidst the government’s “stay-at-home” orders.
On the other hand, the major oil producers kept pumping out more oil than ever, which led to the crash of the oil market by leaving so much oil unused that American oil producers ended up having trouble finding place to store it.
It didn’t help either that the coronavirus pandemic took over the world right when the production of oil was surging more than over. Up till March, U.S. alone was producing more than 13 million barrels of crude oil PER DAY.
One might think that the lowered oil prices may have provided benefit to the ordinary people. BUT, with the coronavirus pandemic has caused the people to stay at their homes. This means that the lowered prices are totally useless as people do not need the oil. This is also part of why the oil-prices have plummeted.
MEASURES TO CONTROL THE MARKET CRASH
With the excess oil piling up, major oil-producing nations have agreed to cut down on their oil production. Even the global oil companies are restricting production. BUT oil producers cannot slow their production fast enough. This has led to all the extra crude going into storage and being sent to tanks, already close to their limits.
U.S. President Trump has also made a pact with OPEC Oil Cartel to cut between 10 million and 20 million barrels of oil from the market from next month. Though, this has been dismissed by many within the oil market as a “too little, too late” response to prevent a market crash.
TRUMP’S REMARKS ON THE OIL CRASH
U.S. President Donald Trump seems to be taking this market crash very lightly. Describing it as a “short-term” thing, the President said that this plummet in prices is more so a “financial situation” rather than an “oil situation”. He also seemed confident that the oil prices will be back up until next month.
After its historic downwards spiral on Monday, it seems that the crude oil prices have started to recover a bit. On Tuesday, the oil prices had a rebound and are again going into positive territory.
The future of the oil-market remains unsure. With some experts suggesting that this might have a permanent impact on the market while others presenting the notion that this is only a temporary thing, only time will tell us what’s next.