For the first time ever, oil prices fell into the negative
Storage facilities exceed capacity, and suppliers run out of places to sustain supply. Market analysts say traders were dumping Maycontracts with the hope that the expense of processing and shipping oil would be too big to bear at a time when potential buyers are not there.
New York's latest oil markets collapse has made headlines worldwide but it wasn't entirely unforeseen. Western Canadian Select's price had been floating for several weeks at historic-low rates, leading one analyst to say, "A barrel of oil is becoming cheaper than a pint of beer."
Saudi Arabia and Russia signed a landmark agreement last week to reduce global oil production by about 10%. But this was not enough to curb the plummeting costs. The negative price effects would be far-reaching. Oil-producing nations will be hit hardest, with market participants selling the true Brazilian, Norwegian crown, and Mexican peso to the US dollar. Traders are now watching to see if those countries can further slash out demand. The effect on the US energy market is another matter of concern. Whiting Petroleum, based in Colorado, filed for bankruptcy earlier this month and is predicted to be the first of several shale companies to collapse into the midst of the pandemic. Analysts predict more companies will be in trouble as oil prices start to plunge and there are less job-supplying infrastructure projects.
We're never going to let the amazing U.S. Oil & Gas Industry down,'Trump said Tuesday in a tweet. "I have instructed the Energy Secretary and the Treasury Secretary to devise a strategy that will make funds available so that these very critical companies and jobs can be secured in the long term! "But experts claim that the way out is not easy. Low oil prices typically mean lower pump prices. But the market for gas will be low before the pandemic is contained. It is important, in the midst of these extraordinary circumstances, that countries work together to find unparalleled solutions.
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