The May contract last traded at negative $7.45 per barrel, which means traders would effectively have to pay to get the oil taken off their hands. Meanwhile, international benchmark Brent crude futures plunged 28% to $18 per barrel. As the contract approaches expiration, trading volume is typically thin, so longer-term contracts can be more indicative of how Wall Street views the price of oil. However, the most active contract, for June delivery, tumbled more than 31% lower during morning deals, falling to $13.97 per barrel.
The front part of the oil futures ‘curve,’ which is the May contract that expires on Tuesday, was hit the hardest since it applies to fuel that’s set to be delivered while most of the country remains on lockdown thanks to the coronavirus. The only buyers of oil futures for that contract are entities that want to physically take the delivery like a refinery or an airline. But demand has dropped and storage tanks are filled, so they don’t need it.
The coronavirus pandemic has led to unprecedented demand loss. The International Energy Agency warned in its closely-watched monthly oil report that demand in April could be 29 million barrels per day lower than a year ago, hitting a level last seen in 1995. And with places to store the crude quickly filling, some argue that prices could stay lower for longer.“Even as OPEC oil production cuts are set to kick in May 1, and supply and inventories should tighten significantly in 2H′20, the next 4-6 weeks are seeing severe storage distress, likely to drive wild price realizations and unusual disconnects, including supercontango and negative prices,” Citi analysts led by Eric Lee wrote in a note to clients Monday.