The West Texas intermediate (WTI) May futures contract traded as low as $US40 per barrel (/bbl) as buyers deserted the market.
"Physical buyers in the US are reluctant to take on more crude at the moment. Storage facilities are filling fast.”
With the WTI May futures contract due to expire, anyone holding a contract would be forced to accept physical delivery. With storage facilities filling fast, particularly at the WTI pricing point – Cushing - there were fears there would be nowhere to store it. The contract eventually closed the session at -$US37.63/bbl.
While negative prices are hard to fathom, they are rooted in reality.
Many physical crudes in North America have been trading in single digits for weeks. Bakken crude, a major oil product in the US, fell below $US9/bbl last week. West Canadian Select, another major crude fell as low as $US4/bbl two weeks ago.
So it’s no surprise that as the front-month futures contract reaches expiration, it has naturally gravitated towards the spot price.