Falling into the I thought I would never hear or see category, there’s more talk and reports of crude oil perhaps falling to $0 or even lower. I know this sounds nuts, but there are trader and analyst now out there debating if crude oil prices could actually go negative as demand plummets and oil stockpiles surge. Some traders have said the massive global shutdown could create a +20 million barrel-per-day surplus of oil in the market that would rapidly exceed storage capacity, forcing oil producers to pay customers to buy the commodity – hence, in effect, negative oil prices. There’s talk right now that the world has about 1.5 billion barrels of available storage. Keep in mind, oil producers still have hedges in place and will continue to pump while those hedges protect a profit. But with the demand spigot simply shutting off supply is going to pile up. Bloomberg recently pointed out case in point: In the aftermath of the last major downturn, a load of North Dakota sour crude was briefly priced at negative 50 cents a barrel before being revised to a mere $1.50. Even if crude oil prices trade down into the teens or single digits it’s going to rip the face off many inside the industry and wreak massive devastation. Personally, I’m not on board with the argument of single-digit crude oil prices, but I did want everyone to know there is a lot of talk and debate circulating inside the trade. Be careful! (Source: OilWorld; Bloomberg; Financial Times; WSJ; Citi)
