Coronavirus Oil Price Plunge: Futures Traded At Less Than $3 A Barrel

Update: 4:38 p.m. EDT

The May contract, which expires Tuesday, settled at a negative $37.63, falling $55.90 on the day, a historic rout, and meaning means producers would have to pay traders to take the contract. Prices for subsequent months were slightly lower.

Update: 3 p.m. EDT

Crude oil prices plunged into negative territory Monday afternoon, down to a negative $40.32 before recovering slightly to a negative $18.65.

Update: 1:45 p.m. EDT

At 1:45 p.m. EDT, the price fell to $1.23 a barrel, off the low of $1.02.

Original story

Crude oil futures fell toware $3 a barrel in early afternoon trading Monday for the first time in decades, spurred by coming contract expirations amid a global coronavirus slowdown and a shortage of storage space for excess production.

In early afternoon trading, crude oil was as low as $2.24 a barrel, down 85%.

Demand for crude has dropped precipitously in recent weeks as industrial and economic activity has ground to a halt, the result of stay-at-home orders and complete lockdowns around the world to stem the spread of the coronavirus, which has infected upward of 2.4 million people, killing 166,800.

The May contract for crude expires Tuesday. Many traders bailed on Monday and producing prices not seen since the early 1970s. The June contract fell more than 10% to about $22 a barrel. Prices are down more than 90% since the beginning of the year.

The oil glut was exacerbated by a price war between Saudi Arabia and Russia after Moscow refused to agree to cut output ahead of the expiration of the OPEC+ production agreement. Both countries cranked up production until an agreement was reached a week ago but it doesn’t appear to have had much of an impact.

“There is little to prevent the physical market from the further acute downside path over the near term,” Michael Tran, managing director of global energy strategy at RBC Capital Markets, told Bloomberg.

“Refiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.”

Bloomberg reported some buyers in West Texas are offering just $2 a barrel.

Standard Chartered’s Paul Horsnell said U.S. drilling is at a standstill, with 13% of operations closed down.

“People are concerned that we are going to see so much buildup of inventory that it’s going to be very difficult to fix in the near term and there is going to be a lot distressed cargoes on the market,” Michael Lynch of Strategic Energy & Economic Research Inc. told Bloomberg.