The price of U.S. oil plunged below zero for the first time ever on Monday while the price of United Kingdom oil fell to an 18-year low on Tuesday.
India Strategic Petroleum Reserve (SPR) is only 37 million barrels that is equivalent to 13-16 days usage at current rate of consumption.
"What it means is there's no available storage anymore so the price of the commodity is effectively worthless. There's no place to put it, so you've got to flush it basically".
"They don't want it".
The worry for many investors holding this contract was that there was no storage space and they thought better to pay investors for the contract, rather then pay for storage. Given the shutdown to the USA economy, oil inventories in the United States could hit a new record high in May, exceeding the previous record of 1.374 billion barrels that was recorded in August/September 2016.
With much of the global economy at a standstill due to the CCP (Chinese Communist Party) virus, a novel coronavirus that causes the disease COVID-19, physical demand for crude has dried up, leading to a supply glut.
Brent was down $US2.51, or nine per cent, to settle at $US25.57 a barrel. Elsewhere, oil prices have not dipped below zero, but analysts say that they will not be spared from the fate suffered by the U.S. should lockdowns remain in place.
Now, the Indian Crude Basket price is around $33 per barrel.
USA oil prices plummeted in historic fashion Monday, crashing below zero as traders unloaded positions ahead of the May contract's Tuesday expiration.
But the curbs agreed to by OPEC+ were not due to start until May and in any case, at its trough the projected drop in global oil demand was expected to almost double the agreed ouput cuts in size. Such an eye-popping slide is the result of a quirk in the oil market, but it underscores the industry's disarray as the coronavirus pandemic decimates the world economy.
With that, expect fuel prices to go down within the next couple of months as well.
The extreme price move showed how much excess supply there is compared to available storage capacity in the USA oil market, for which WTI is a proxy.
Oil traders usually play a game of pass the parcel with contracts for barrels of oil.
Meanwhile, US stocks were shaken deeply into the red Monday after oil traders desperate to unload near-term contracts for their vital commodity sold at a loss. "It's a sign of the very real imbalance between supply and demand".
And it is also about how much oil can be stored.
This has led to drilling halts and drastic spending cuts. The Nasdaq 100 Index lost just 0.5 percent, while Exxon and Chevron took the Dow Jones Industrial Average down nearly 2 percent.
