US Oil Drops Below $0, Nigeria’s Bonny Light Sells for $25

Oil futures experienced a historic fall below $0 a barrel as the coronavirus pandemic has made traders resort to futures  markets other than taking physical delivery of crude.

Crude futures are futures contracts in which buyers and sellers of oil coordinate and agree to deliver specific amounts of physical crude oil on a given date in the future.

The fall comes Monday after traders fled the May futures contract ahead of its expiration on Wednesday, following dwindling storage space.

West Texas Intermediate (WTI) for May delivery dropped as low as -$1.98 a barrel, in New York and -$37.45 as of the time of filing the report.

Despite the drop, Brent Crude futures sold at $25.92 in late hours of Monday, after a 2.12% decline, while Nigeria’s crude price was $25 per barrel on Monday.

WTI price fall represents the lowest since 1946, according to data from the Federal Reserve Bank of St. Louis. 

“The most simple explanation for negative oil prices is that midstream players are now paying ‘buyers’ to take oil volumes away as the physical storage limit will be reached. And they are paying top dollar!” Louise Dickson, a business analyst at Rystad Energy told MarketWatch.

Despite the oil cut deal agreed by OPEC plus prices have been unable to rally.