CRU: “Houston, We’ve Got a Problem” – U.S. Oil Price Goes Negative

By CRU Principal Analyst Justin Hughes and Senior Cost Economist Ross Cunningham, from CRU’s Global Steel Trade Service

The international oil markets have been under severe pressure since the outbreak of Covid-19 with the rapid destruction of crude oil and oil product demand. Despite attempts for coordinated supply-side action by major oil producing nations, including those outside of OPEC, the pace of the unabated oil production throughout February and March, coupled with heavily discounted prices from Saudi Arabia and Russia, has meant dwindling global storage capacity will be completely full by mid-June. Current estimates indicate that the daily crude oil excess is nearly 30Mbpd. Storage at each refinery differs significantly and thus some regions are already unable to process or move additional liquid volume, and as such, are facing a crisis. From the demand side force-majeures are being issued as the implications of taking delivery of an oil product are considerable in the current marketplace.