Oil prices in the US physical market became negative
Oil prices in the U.S. physical market have become negative - producers pay consumers to take away the "black junk," writes Bloomberg. The first flow of oil, which turned everything upside down, was high-sulfur grade Wyoming Asphalt Sour, which is used mainly for the production of bitumen.
A crude raider, Mercuria Energy Group, asked for a price of minus 0.19 cents per barrel in mid-March, effectively asking the producer to pay for the luxury of getting rid of their production. "This oil has no way out to sea, it just has no buyers. In regions where storage facilities are quickly filled, prices can become negative," says Elizabeth Murphy, an analyst at ESAI Energy consulting company.
Brent and WTI oil grades, reference oil grades traded on U.S. exchanges, fluctuate at levels above $ 20 per barrel. But in a world of physical oil, where real barrels of oil go from hand to hand, producers get much less as the demand for oil drops due to quarantines imposed to stop coronavirus outbreak.
Oil traders believe that supplies of other oil are likely to soon see negative prices at the wellhead, as refineries reduce refining volumes, depriving some of the oil that is landlocked of access to pipelines.
Several North American oil varieties are already traded at single sign prices as the market tries to force some manufacturers to close. The cost of Canadian Western Select, the benchmark for Canada's giant hard-to-recover oil industry, fell to US$5.06 on Friday. Southern Green Canyon in the Gulf of Mexico now costs US$11.51 per barrel, Oklahoma Sour is traded for US$5.75, Nebraska Intermediate for US$8 and Wyoming Sweet for US$3 per barrel.
Earlier, Ryan Sitton, commissioner of the regulatory agency responsible for oilfield development in the largest oil-producing state of the United States, tweeted that U.S. pipeline operators are asking producers to limit oil production because they face a shortage of storaga.