US oil prices fall below zero amid the coronavirus turmoil and producers are forced to pay buyers to take barrels off their hands.
The U.S. oil price turned negative for the first time in history on Monday, climbed above zero Monday night and slumped back to negative (-$4.29 a barrel) as trading began in Europe on Tuesday.
The West Texas Intermediate (WTI), the benchmark for U.S. crude prices, fell to -$40 a barrel on Monday as storage facilities filled to their limit and producers were forced to pay buyers to take barrels off their hands.
John Browne, former CEO of BP, told the BBC that prices would remain low due to a chronic oversupply of crude in the global market.
The U.S. market collapse marks the first time in history that the price of an important oil benchmark has dropped below zero.
“The prices will be very low and I think they will remain low and very volatile for some considerable time,” Browne said. “There is still a lot of oil being produced that is going into storage and not being used.
“This is very reminiscent of a time in the mid-1980s when exactly the same situation happened – too much supply, too little demand and prices of oil stayed low for 17 years.”
Browne was referring to a 1980s supply glut that saw prices plummet and proved a key factor in the collapse of the Soviet Union.
The negative prices are for WTI oil delivered in May when demand is expected to fall to its lowest point and before production cuts agreed upon earlier this month began to take effect.
In other global markets, prices are substantially lower than they were at the start of the year, but still higher than in the U.S. which as a country faces higher costs to access major storage sites from landlocked fields.
