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Never before has the price of American light oil been lower than on Monday night. But few merchants are falling short of the price.
published:,
US Lightweight Oil (WTI), delivered in May, delivered a drama Monday night that is rarely seen in the oil market.
Finally, the price ended negative after falling more than one hundred percent. In theory, this means that oil companies have to pay to get rid of the oil.
WTI oil contract trading in May closed Monday night at $ 37.63 a barrel, a drop of more than 300 percent.
“This moment is, of course, historical and could not better illustrate the price utopia the market has been in since March,” Rystad Energy oil analyst Louise Dickson says in a comment.
– Since then, traders have raised and lowered prices due to speculation, hope, tweets, and illusions. But now reality is sinking, continues Dickson.
The oil layers are full
In March, the problems in the oil market began when Saudi Arabia and Russia did not reach an agreement on cutting production. This happened at Easter, without having any particular impact on the price of oil.
The development comes from the oil contract with delivery in May that has an expiration date of Tuesday. Total oil stocks and low demand due to the corona crisis have caused a sharp drop in price throughout the day, as oil traders escape their contracts.
– Rystad Energy has long warned against single-digit prices for WTI oil and even the possibility of turning negative. Now that we have reached this limit, the logical next step will be to abandon oil and bankruptcy, says Dickson.
In a recent Dickson comment, half an hour later, he says it’s like “explaining something that is unique and unreal” regarding the oil producers who now pay to get rid of the oil.
– And what does that mean? Such costly stops or even bankruptcies can now be cheaper for some operators, instead of paying tens of dollars to get rid of what they produce, Dickson says.
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Few Merchants Worry About May Prize
Although the trend on Monday night appears to be dramatic, there really are few of those actively trading in oil that are significantly concerned. This is in part due to the fact that the May contract is no longer the busiest trade, writes the Wall Street Journal.
In simple terms, the oil market can be divided into several parts. This is about the type of oil you want, when you want it. Therefore, in practice, there are many oil prices in the world, but the two most traded and mentioned are WTI oil and burned crude, which include North Sea oil.
As futures contracts approach their expiration date, their price will normally change to the underlying price of physical barrels of oil.
Due to the huge uncertainty in the oil market, the price of physical oil has fallen dramatically recently, which means that the May contract will be discontinued before oil ends.
Before the expiration date, oil traders are primarily engaged in buying and selling contracts with which they can make money without leaving the oil at the end. This means that many people sign contracts before the expiration date.
This can best be illustrated by looking at the June contract, which was traded on Monday night for around $ 21 a barrel.
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Krone-fall
The krona depreciates widely on Monday night. It is happening at the same time that the price of US light oil (WTI) falls through the zero line and is trading at negative prices. North Sea oil falls ten percent to $ 25.48 a barrel.
The marked weakening occurred just before eight o’clock. Shortly after half-past nine, something fell.
The largest is the depreciation against the dollar, which rose 1.49 percent against the crown. A US dollar now costs NOK 10.48, which is 10 cents more expensive in just over half an hour and more than 15 cents more than on Monday morning.
A euro costs NOK 11.37, a pound costs NOK 13.04 and you have to spend NOK 104.58 to get a hundred Swedes.
