Last month, oil went negative for the first time in history. We trace back how it happened, and what to expect moving forward.
For the first time in history, oil has gone negative. How did WTI futures, a benchmark for oil pricing, fall below zero? With national economies at a standstill due to COVID-19, demand for oil has plummeted. At the same time, Russia refused to decrease production to moderate prices, triggering a price war with Saudi Arabia, and flooding an already oversupplied market.
While excess supply normally goes into storage, storage facilities have reached capacity, meaning producers have to pay customers to take oil, resulting in a negative price. What’s next? US consumers are highly sensitive to low gasoline prices. Mizuho analyst Paul Sankey says to watch for strong gasoline demand this summer.