CALGARY — A Calgary energy analyst says the plunge by benchmark U.S. crude oil prices into negative territory for the first time on Monday is a short-term anomaly that likely won't have a lasting effect on Canadian producers.
Matt Murphy of Tudor Pickering Holt & Co. says the drop in West Texas Intermediate near-month contract prices below negative US$37 per barrel is due to unique circumstances.
Prices collapsed due to fear that storage tanks are growing dangerously close to full amid the coronavirus pandemic, which has severely curtailed global demand for crude oil and refined products.
WTI price for May delivery settled down US$55.90 Monday at negative US$37.63 per barrel. Those contracts are to expire on Tuesday.
Meanwhile, futures contracts for June delivery were down US$4.60 at US$20.43 per barrel.
Senior analyst Martin King of RBN Energy said storage at the Cushing, Okla., WTI trading hub is expected to hit capacity within four weeks.
"If you're a seller and you're desperate to get rid of the contract, you're willing to pay somebody to take it off your hands," he said.
"And if you're willing to buy the contract, you want to be compensated for what could be enormous risk and not being able to deliver those barrels or store those barrels. So you want to be paid to take that contract."
This report by The Canadian Press was first published April 20, 2020.
The Canadian Press
