US oil prices ended New York trading in the negative on Monday for the first time ever as a supply glut forced traders to pay others to take the commodity.
With space to store oil scarce, US benchmark West Texas Intermediate for May delivery ended trading at -$37.63 a barrel ahead of Tuesday's close for futures contracts -- when traders who buy and sell the commodity for profit would have had to take physical possession of it.
The plunge defied a deal reached last week by the Organization of the Petroleum Exporting Countries (OPEC) and independent producers to slash output by nearly 10 million barrels per day starting May to boost prices. It also showed the enduring power of the pandemic, which has forced people to stay indoors to stop the spread of COVID-19, bringing much of the global economy to a halt.
Much of the plunge was chalked up to technical reasons -- the May delivery contract is close to expiring so it was seeing less trading volume, which can exacerbate swings.
But prices for deliveries even further into the future, which were seeing larger trading volumes, also plunged. Demand for oil has collapsed so much due to the coronavirus pandemic that facilities for storing crude are nearly full.
A price war between Saudi Arabia and Russia had accelerated the slide prior to the production deal, hurting US shale producers. And storage capacity is becoming scarce in the United States, with the main WTI facilities in Cushing, Oklahoma filling up.
"Basically, bears are out for blood," analyst Naeem Aslam of Avatrade said in a report. "The steep fall in the price is because of the lack of sufficient demand and lack of storage place given the fact that the production cut has failed to address the supply glut."
In the stock market, the mild drops ate into some of the big gains made since late March, driven lately by investors looking ahead to parts of the economy possibly reopening as infections level off in hard-hit areas.
The Dow Jones Industrial Average was down 283 points, or 1.2%, to 243,958. The Nasdaq was close to flat. Oil company shares were predictably battered in the downturn, with Chevron down 1.8% and ExxonMobil losing 3.2%.