Negative Price of May WTI Futures to Have 'No Effect' on Global Oil Market - Economist

MOSCOW (Pakistan Point News / Sputnik - 21st April, 2020) The global oil industry will be untouched by the slump in the price of West Texas intermediate (WTI) crude for delivery in May, which fell to a negative value on Monday for the first time in history, Dr. Mamdouh G. Salameh, an international oil economist, told Sputnik.�

Earlier on Monday, the price of May futures for WTI was trading down 292.67 percent at minus $35.2 per barrel, minutes earlier falling to minus $39.55 at the New York Mercantile Exchange (NYMEX).

"This has no effect on the global oil market while the coronavirus outbreak continues. The [US President Donald] Trump administration is under pressure to bail out the shale industry because of its economic and geopolitical importance to the United States. Still, there comes a point when the US taxpayer will say a bankrupt industry should be let to pass away peacefully," Salameh said, referring to the sharp decrease in the price of WTI.�

Nevertheless, such a downfall of the WTI crude is unusual and is sparked by the enormous pressure that the US shale producers are currently facing due the falling demand amid the COVID-19 pandemic, the expert noted.

"That level of price collapse of the WTI crude is very unusual. However, US shale oil producers face unusual problems, namely rising outstanding debts almost reaching one trillion Dollars, inability to export their oil and lack of their own storage. Hiring storage outside their premises costs them far more the contract price for their oil in the current situation. So they are trying to virtually either give it away or sell it at any price," Salameh added.

The COVID-19 crisis has shattered the US demand for oil with much of the nation subject to stay-at-home orders and roads nearly devoid of traffic. That, combined with a failure of the OPEC+ talks in April, has produced an unprecedented glut that exceeds storage capacity in many countries.