Reasons for the Lowest Crude Oil Prices
Record Low of $-37 per Barrel Has Reached Across the United States
The main reasons for the lowest crude oil prices in the spread of COVID-19 infection which has infected more than 2,518,036 people across the globe, out of which around 173,445 individuals have died with COVID-19 as their cause of death after suffering through critical symptoms of the infection. The crude oil prices have reached the maximum lowest point of $0 per barrel across the United States due to a massive decrease in the usage of oil and petroleum products amid coronavirus pandemic.
Crude oil across the United States of America
The reasons for the lowest crude oil prices which are being observed across the United States is due to the massive reduction in the demand for the oil products as compared to the surplus quantity of oil ready to be transported across the country. Even though COVID-19 has become the reasons for the lowest crude oil prices across the United States along with a decrease in oil prices across the world, there has been no significant change in the prices at the gas pump.
The benchmark United States oil prices have experienced a plunge as the cost per barrel has dropped to $0 on Monday, which has happened for the first time in history. The COVID-19 pandemic has really affected many aspects of human civilization across the world, also being the reasons for the lowest crude oil prices being experienced, which is directly affecting the country’s economy.
This unexpected global energy excess is also one of the reasons for the lowest crude oil prices as the COVID-19 outbreak has caused a complete halt in travel, majorly affecting the global airline industry along with the cessation of all economic activity across the world including the United States.
Meaning of Negative future oil pricing
The factors affecting the price of crude oil per barrel are demanding, supply, and quantity of the fuel. The supply and availability of crude oil have been way above demand due to the implementation of restriction of all traveling and the reasons for the lowest crude oil prices in the history of the country.
Due to the oversupply of crude oil, the storage tanks for West Texas Intermediate have become so full, and there is no space for further oil storage, which is one of the reasons for the lowest crude oil prices being experienced by the United States.
One of the main reasons for the lowest crude oil prices is the way oil is traded. A futures contract is for 1,000 crude oil barrels, which will be delivered to Cushing, from where energy companies having the availability to contain 76 million barrels of oil will store the excess oil. Each contract trade is for one month only. The contractors for the month of May do not want to take this batch of delivery as they later might have to pay people to take the excess oil out of their hands due to a reduction in storage capacity.
This crash in crude oil pricing will not have any side effects on the normal pricing at gas stations, but a typical American citizen might experience saving $150 to $175 this month on their purchase of fuel. There would be a continuation of fluctuations in the prices of gasoline, diesel, and jet fuel in the month of May amid COVID-19 pandemic.
The decline in oil prices will affect the airline industry as they might be able to offer cheap and affordable flight tickets in those areas which have reopened their international borders or domestic air travel. The general population is not using this specific means of travel as the public is remaining homebound amid COVID-19 pandemic lockdown. Out of all the reasons for the lowest crude oil prices in the history of the United States, decreased storage capacity is the main drawback.