By stock_street_wire

Why Oil Prices Just Plunged to Less than $1 a Barrel

Oil just fell to 26 cents.  And that’s not a typo.

“The collapse…is mostly a reflection of traders rolling contracts to June as no one wants to take delivery because storage capacity is getting close to being reached,” said Edward Moya, senior market analyst at Oanda said, as quoted by MarketWatch.

All as demand for oil disappears, and supply overflows.

OPEC hasn’t helped much with a 10 million barrel a day cut.  Goldman Sachs has even noted oil prices would continue to fall in the coming weeks, reasoning that a “historic yet insufficient” deal by major oil producers to cut output is unlikely to offset a coronavirus-led demand rout, as noted by Reuters.

“It hasn’t taken long for the market to recognize that the OPEC+ deal will not, in its present form, be enough to balance oil markets,” wrote Stephen Innes, chief global markets strategist at AxiCorp said, as quoted by CNBC.

Worse, there’s just not enough demand to offset supply issues.

As a result, we’re seeing a considerable buildup of supply with no place to store all of it.

“Traders are storing an estimated record 160 million barrels of oil on ships – double the level from two weeks ago as they seek to tackle a glut of stocks created by a slide in global demand from the coronavirus,” as noted by Reuters.

Until we see supply and demand balance, oil could even go negative at this point.  “There is no limit to the downside to prices when inventories and pipelines are full,” commodities hedge fund manager Pierre Andurand said as quoted by the Financial Post. “Negative prices are possible.”

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