It was a rough Monday for the oil industry, particularly in the United States, as the price of West Texas Intermediate (WTI) crude oil futures expiring in May 2020 plunged by over 300% to negative US$37.63 per barrel by the close of the oil market, the lowest level ever recorded.

Meanwhile, Brent crude oil prices, which is what most oil-producing countries use as a benchmark, declined by a significantly lesser margin of 8.9% to US$25.57 per barrel. The declines come in light of the Covid-19 pandemic that has shattered demand for crude worldwide.

Recently, OPEC+, which consists of OPEC, along with Russia and other oil-producing nations, agreed to slash global crude oil output by 9.7 million barrels per day from May but it appears this has done little to drive up prices.

In the United States, the accelerated decline in the price of WTI crude was due to technical reasons, as the May delivery contract was set to expire on Tuesday, April 21, 2020, the last day oil producers can trade barrels that are scheduled for delivery next month (May), at a time when oil storage for WTI crude is expected to reach its limit.

The negative price of May WTI crude futures means there are very few buyers for the commodity and (by technicality) producers would pay traders to take the oil off their hands. However, this situation isn’t reflected in June WTI crude futures, which will become the default WTI oil price from today – currently settling at above US$20 per barrel on Monday.