Oil producers in the US are now paying buyers to take oil from their hands as oil futures turn negative in the US for the first time in history.
This comes at a time the demand for oil has gone down across the world as the Coronavirus (Covid-19) forces most countries into a lockdown, limiting economic activities that largely depend on petroleum oil.
Its is estimated that by May 2020, most oil producers will have no storage left for crude oil, forcing them now to “get rid” of their reserves in a bid to have more storage.
BBC reports that the price of a barrel of West Texas Intermediate (WTI), the benchmark for US oil, fell as low as minus $37.63 (Ksh3,800) a barrel.
A barrel is an approximate of 120 litres of oil.
In Europe, Brent Crude has gone down by over 8.9 percent ($26 a barrel) based on June contracts, which are already active. Brent Crude is the benchmark used by Europe and the rest of the world.
“$30 is already quite bad, but once you get to $20 or even $10, it’s a complete nightmare,” said Artem Abramov, head of shale research at Rystad Energy as quoted by CNN.
The drop in global oil prices have also been instigated by the price wars between Saudi Arabia and Russia that has seen the former double production and flood the market.
The drop was so worrying that Opec members and its allies early this month agreed to slash global output by about 10 percent, the largest cut in oil production ever to have been agreed.
Experts say despite the cut in production, the world has still more oil that it requires, with most storage facilities overwhelmed.