The price of US West Texas Intermediate crude oil could fall to negative $100 per barrel next month, reported MarketInsider quoting an analyst.
“Will we hit -$100/bbl next month? Quite possibly. We have clearly gone to full scale day-to-day market management crisis, and as we said when we first called for negative prices, the physical reality of oil is that it is difficult to handle, volatile, potentially polluting, and actually useless without a refinery,” Paul Sankey, a managing director at Mizuho Securities, wrote in a note on Tuesday,
according to the report.
The price of WTI crude oil slumped to record lows, closing in negative territory for the first time on Monday, at about negative $37 per barrel due to scare storage capacity for a supply glut of the crude oil.
The global oil demand has been disrupted due to the coronavirus pandemic, weighing on prices of oil despite historic production cuts from OPEC. Futures contracts for May delivery expired on Tuesday, adding pressure to WTI.
According to Sankey, the US oil market gets fundamentally worse over the next month, the report added.
“If you had a stinking barrel of oil in your backyard, would you pay someone $100/bbl to take it away? Yes, and you would probably be relieved you were not charged $300/bbl,” Sankey wrote.
“That is the situation we are in, of producers having nowhere to go with the inexorable production that takes weeks and months to reduce to zero. Of course, you now need someone to handle it for you. And they are sold out of capacity to do so,” he said.According to the report, Mizuho also said that in mid-March, oil prices could fall into negative territory.