Negative Oil Prices

The near term contracts from USA’s crude oil traded negative for the first time. A barrel was priced at minus 38 USD.

Negative Prices

A commodity can be priced negatively when the demand for it drops to such an extent that the suppliers have to pay people to take it off their hands. The crude oil was traded at minus 38 USD for the first time in light of the drastic decline in demand for oil as a consequence of lockdowns imposed to curb the SARS CoV 2 spread.

Previous Cases

Negative pricing has occurred in previous cases too:

  • Negative oil prices manifested for sour crude oil in March.
  • In 2019, the prices of natural gas in USA turned negative.
  • In 2018, the flooding of the grid with green energy turned the electricity prices negative.

Oil Markers

Oil markers are crude oil grades that serve as benchmark for oil pricing. They are also called benchmark crude. The 3 main benchmark crude are West Texas Intermediate, Brent Blend and Dubai Crude.

West Texas Intermediate

The West Texas Intermediate is a grade of crude oil that is also known as Texas Light Sweet. It serves as the benchmark for crude oil pricing. It is a low density crude oil grade with low sulphur content (hence called sweet).

Topics: 

Latest E-Books

Comments