Oil plunged into negative territory for the first time on record on Monday. The commodity's latest round of sharp selling came as uncertainty mounted about storage for excess oil. Demand for crude has plummeted since the coronavirus outbreak froze activity worldwide. The price of West Texas Intermediate crude oil futures expiring in May plunged 321%, to -$40.32 a barrel, the lowest level ever recorded. Brent crude losses were muted by comparison, with the commodity sliding 9.5%, to $25.41 a barrel at intrasession lows.
The price of oil has continued to slide even after OPEC and its allies agreed to the biggest-ever production cut - one intended to backstop prices. Investors remain unconvinced that the cuts can offset cratering demand for the commodity as the novel coronavirus pandemic keeps society from operating normally.
WTI crude for May delivery has traded at large discounts to longer-dated contracts. That dynamic is playing out amid worry that a key storage hub in Cushing, Oklahoma, is nearing capacity. Basically, bears are out for blood," said Naeem Aslam, the chief market analyst at AvaTrade. "The steep fall in the price is because of the lack of sufficient demand and lack of storage place given the fact that the production cut has failed to address the supply glut."
He added: "The bottom line is that there is no doubt that oil prices are way oversold at the current level, but given the circumstances, it is likely that the price may continue to fall further because the rig count hasn't touched its bottom yet."
