Oil prices plunged into the negatives Monday, suggesting those who have oil to sell were willing to pay others in order to get rid of the oil as barrels continue to be stockpiled in any available space companies can find in storage facilities, the New York Times reported.
The oil market faces a glut with nowhere to put physical barrels of crude, prompting some buyers in Texas to offer some oil streams for $2 a barrel, raising the possibility that producers may soon have to pay to relieve themselves of crude, Yahoo Finance reported Monday. Oil companies may have to turn taps off or see tank farms fill to the brim, according to the New York Times.
BREAKING: Goldman Sachs says U.S. oil prices could crash to near $0 a barrel today. https://t.co/RGQfq5ZrM3
— Rebecca Jarvis (@RebeccaJarvis) April 20, 2020
US West Texas Intermediate crude for May delivery —a key American oil benchmark — was down $15.71, or 86%, at $2.66 a barrel, a one-day drop that would be the largest on record since 1983, according to Market Watch.
Since the beginning of the year, oil prices have taken a nosedive of more than 90% due to the compounding effects of the coronavirus and a breakdown in the OPEC+ agreement. The price collapse has forced crude explorers to shut down 13% of the American drilling fleet last week, according to Yahoo Finance.
Goldman Sachs warned in early April that producers, especially in landlocked pipelines like those in the U.S., Canada, and Russia, will face mounting problems since there’s no place to get rid of mounting supply, according to CNBC. “Given the cost of shutting down a well, a producer would be willing to pay someone to dispose of a barrel, implying negative pricing in landlocked areas,” the bank said.
Editor’s Note: This article has been updated to reflect the more recent changes in the market.