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The price never fell below $ 10 a barrel for almost 40 years, the life of the contract.
In just a few months, when billions of people stopped traveling, the Corona Virus pandemic destroyed fuel demand in a way that failed financial crises, recessions, and wars, as the United States had no oil to store.
While the unusual circumstances of negative oil prices may not repeat themselves, many in the industry say they augur more difficult days and that years of excessive investment in oil will not be corrected in weeks or even months.
“What happened in the forward contract that day indicated that things started to get worse earlier than expected,” said Frederick Lawrence, vice president of economics and international affairs for the American Independent Petroleum Association.
He added: “Pipeline companies are sending notifications that they cannot take more crude oil. This means that the well is closed, even retroactively.”
Evidence of the erosion of value of an indispensable global product since the late 19th century has circulated around the world last week.
In Russia, which is one of the world’s largest producers, the sector is considering resorting to burning oil to block it from the market, sources told Reuters.
Equinor, the Norwegian oil giant, cut its quarterly dividends by two thirds. Next week, the results of the world’s largest oil companies, including Exxon Mobil, BP and Royal Dutch Shell, will be released. All are expected to announce details of further spending cuts, and investors will closely monitor the dividend plans of these companies.
US-owned Continental Resources, owned by US billionaire Harold Hamm, shipped technical kits to the fields in Oklahoma and North Dakota in midweek to suddenly shut down Aabar, and the company announced it was unable to deliver shipments of crude oil to customers due to to the low economic viability.
Continental’s decision to declare a state of force majeure, generally limited to war conditions, accidents, or natural disasters, shocked and sparked strong criticism from the leading refining industry association. But some say there is a reason for this, even if it is not acceptable.
Anas Al-Hajji, a Dallas-based energy market expert, said: “Signing contracts is based on the normal conditions of society for the past 100 years. If a new grandfather is outside of these normal conditions, call to a situation of force majeure. This is what Harold Ham and others say: these are conditions that are not Normal “.
Even the long-rumored White House decision that Chevron could no longer operate in Venezuela, where it has been present for nearly 100 years, was received with indifference.
“The global climate is terrible … the license is no longer important,” said a person close to a western oil company in Venezuela.
And the market imposes its word on all producers. Around the world, governments and companies are preparing to stop production, and many of them may have already started.
The Organization of the Petroleum Exporting Countries and its allies have already committed to unprecedented cuts of 10 million barrels of daily supplies, which have yet to be fully implemented. But this commitment was not enough to prevent oil from falling below zero.
Saudi Arabia has said that he and other OPEC members are ready to take further action, but has made no new commitment. An indication of how deeply demand is collapsing is that even if OPEC stops production entirely, supply can still exceed demand.
Production cuts have already been announced in the United States of more than 600,000 bpd, as well as 300,000 bpd due to closures in Canada.
The Brazilian National Oil Company, Petrobras, reduced its production by 200,000 barrels per day.
Azerbaijan, part of the group known as OPEC +, is forcing a BP-led alliance to cut production for the first time.
In general, the main oil companies in these countries were previously excluded from the cuts imposed by the government.
“We have never done this before they came to the country in 1994 and signed the century,” a senior Azerbaijani official told Reuters.
It is no longer possible to adapt to the depletion of oil storage spaces in the world. Kepler Energy Data said land storage capacity worldwide amounted to around 85 percent on Thursday.
The International Energy Agency estimates that demand is expected to decrease by 29 million bpd in April and that consumption is expected to increase in May, but researchers have warned that it expects an annual drop in demand of just 12 million bpd which could be too optimistic.
“I am sure to hear the same numbers about the collapse in demand of 20 to 30 million barrels per day … and until we see an improvement in the situation, one has to ask,” said Jane McGillian, analyst at Tradition Energy who was working on the New York Mercantile Exchange when it launched US crude oil futures in 1983. What does the future hold?
