The price of a barrel of crude oil has dropped below the price of a single roll of toilet paper, no matter how good of a deal you think you’ve snagged on bathroom supplies — unless you’ve found someone willing to pay you $37 per roll.
This is because the upcoming oil futures contracts for West Texas Intermediaries are set to expire this Tuesday, meaning that any investor who holds the contract is obligated to receive oil deliveries at a time when no one wants them and few have the means to store them.
According to CNBC, the price of crude oil for the May futures contract at West Texas Intermediaries has closed at negative $37.63 per barrel, significantly lower than the price of oil futures contracts with later delivery dates.
“There is still a lot of crude on the water right now that is going to refineries that do not need it,” Helima Croft, global head of commodities strategy at RBC Capital, told CNBC on Monday. “Right now we don’t see any near-term relief for this oil market.”
“Basically, bears are out for blood,” said analyst Naeem Aslam of Avatrade, reports The Dallas Morning News. “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.”
According to NPR, Mike Sommers, the president of the American Petroleum Institute, described the upcoming issues in the oil market last month, predicting an unprecedented convergence of supply and demand problems.
“We’ve had supply shocks before,” said Sommers. “We’ve had demand shocks before: Think of 9/11 or the Great Recession,” but added that “we’ve never had demand shocks with supply shocks.”
The news agency reports that the price of crude oil from West Texas Intermediaries was approximately $60 a barrel at the beginning of the year, and was only as low as $18 as of last Friday.
The price of crude oil with later delivery dates, such as June or July, has not fallen as dramatically and remains in the positives. Market Watch reports that the price of crude oil with a June contract closed at $20.03.
Just eight days ago, the United States helped to mediate an approximately 10% cut to global oil production coming from countries with high production, including Russia and Saudi Arabia, reported The New York Times.
The news agency noted that the cuts approximate to about 9.7 million barrels per day, but also indicated that the deal would unlikely be significant enough to address the problem.
Demand for oil has tumbled in recent weeks as the coronavirus pandemic has crippled global commerce and eliminated untold numbers of commutes, plane trips and cargo shipments. Experts estimate that demand has fallen by somewhere between 25 million barrels and 35 million barrels a day — or up to three and a half times as much as what the oil nations are promising to cut.