On Monday, US West Texas Intermediate crude oil briefly spiked with a negative trading price. In effect, traders were paid to take the oil contract, with the very lowest price of the May contract falling far below zero. On the Nasdaq exchange, oil contracts were sold for -$37.63 at the close of Monday.

Yesterday’s trough came as investors desperately sold contracts for oil delivery in May to avoid having to pay to get out of them. Investment bank Goldman Sachs advised that the following June contract had performed well, but would likely also fall in price. In a note, bankers said: “While it has outperformed significantly today, […] it will nonetheless see downward pressure in coming weeks.”

It explained the “still unresolved” market surplus but would have nowhere to be stored in coming weeks, which would be the factor ultimately deciding how low oil can go.

The trade body American Petroleum Institute (API) said the trough does not reflect oil’s true value. API Mark Green said: “Monday’s futures trading isn’t indicative of the fundamental value of oil and doesn’t alter the basic global demand for oil and natural gas.

“API continues to say government should focus instead on flattening the curve and getting a better handle on the spread of the virus so that economies can safely start back up again, and we are all looking to our nation’s public health officials for that expertise.”

“Mark this day”: Surprise in the US

Johns Hopkins University applied economist Professor Steve Hanke tweeted his astonishment at the fall of the market. He wrote: “Mark this day on your calendar. You will never see a day like it again.”

The Twitter account of the OPEC secretariat cited figures from its monthly market report to show the US would not be the largest economic contraction of all.

Recently, OPEC agreed on production cuts with Russia and the US, but these will take effect from the start of May. This delay stoked fears which pushed prices past zero, while prices for future oil contracts remain more expensive.

In order to reassure the oil industry, US President Donald Trump tweeted that he would be willing to give loans to struggling oil and gas firms, following similar actions from Canadian state governments.

Reactions from around the world

Earlier, Russian authorities reassured stakeholders, saying it was monitoring the situation but there was no need to be “apocalyptic”.

In Europe, investors and industry leaders worried about the consequences of the fall in WTI for their own markets. Trade body Oil and Gas UK Chief Executive Deirdre Michie said: “While we have anticipated continued pressures on oil markets, there’s no getting away from the fact that this situation is a body blow for an industry already creaking under the strains of the impact of COVID-19 and sustained low commodity prices.

“The dynamics of this US market are different from those directly driving UK produced Brent, but we will not escape the impact. Ours is not just a trading market; every penny lost spells more uncertainty over jobs, our contribution to public services and to the just transition we all want to see.”

Over Tuesday, Brent crude oil also trended downward fast, losing over 20% of its total value but remaining comfortably above zero. Economist Daniel Lacalle remarked on the change:

Meanwhile in India, tweeters quickly started making memes about the low price of oil.