Would They Actually Pay Refineries To Take Their Oil?
Something happened yesterday that has never happened before and does not even sound like it is based in reality. The contract for a barrel of West Texas Intermediate crude oil scheduled for delivery in May closed at a negative $37.63 per barrel.
Yes, you read that correctly I did not make a mistake. A barrel of oil closed at a negative $37.63 meaning that producers of oil would actually pay traders to take their full barrels off their hands.
What is West Texas Intermediate (WTI) crude, according to Investopedea:
West Texas Intermediate (WTI) crude oil is a specific grade of crude oil and one of the main three benchmarks in oil pricing, along with Brent and Dubai Crude. WTI is known as a light sweet oil because it contains 0.24% sulfur, making it "sweet," and has a low density, making it "light." It is the underlying commodity of the New York Mercantile Exchange's (NYMEX) oil futures contract and is considered a high-quality oil that is easily refined.
How can a barrel of oil get to a price in which the producer will actually pay you to take the barrel off their hands? Because no refiner has the ability to even store the oil that has already been extracted from the earth. Thus the oil is worthless to the refineries.
This is what the shutdown of our economies has done to our world. Eventually, many more people will be harmed by this complete economic shutdown rather than a controlled regional shutdown as compared to COVID-19.