Oil Producers In US Paying Buyers To Take Oil As Futures Turn Negative For The First Time In History

The global oil prices have turned negative for the first time in history, forcing some oil producers to pay buyers to take oil from them.

This comes at a time experts revealed that storage facilities are overwhelmed, as the world produces more oil than it consumes especially during this time of Covid-19 pandemic where economic activities have slowed down.

The price of the main U.S. oil benchmark,  West Texas Intermediate (WTI), fell more than $50 a barrel to end the day about $30 below zero, the first time oil prices have ever turned negative.

At the beginning of the year, oil was trading at $60 per barrel, but as of yesterday, the prices fell to as low as $20, the worst in history.

The drop in global oil prices have also been instigated by the price wars between Saudi Arabia and Russia that has seen the former double production and flood the market.

Read: Fuel Prices Drop Below Ksh100 Mark In April Review

Early this month, the Oil Producing and Exporting Countries (Opec) and their allies agreed to cut oil production by 10 percent, but it is predicted that by May there will be no storage left for oil.

The New York Times reports that future contracts that require buyers to take possession of oil in May are expiring on Tuesday, and nobody wanted the oil because there was no place to store it. Contracts for June delivery were still trading for about $22 a barrel, down 16 percent for the day.

The world has an estimated storage capacity for 6.8 billion barrels, and nearly 60 percent is filled, according to energy experts.

In Europe, Brent Crude has gone down by over 8.9 percent ($26 a barrel) based on June contracts, which are already active. Brent Crude is the benchmark used by Europe and the rest of the world.

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