A few weeks ago, I pointed out an article that highlighted a potential problem that would have never crossed my mind: "The world could soon run out of space to store oil. That may plunge prices below zero." Now it appears that problem may be coming to pass. U.S. crude prices dropped more than 100% and turned negative for the first time in history on Monday as traders continue to fret over a slump in demand due to the coronavirus pandemic. The price of the nearest oil futures contract, which expires Tuesday, was the hardest hit, detaching from later month futures contracts with a drop of more than 100%. Just today I saw the price of a gallon of gasoline at $1.51, which is less than half the price it was back in 2003! Some oil is trading negative right now. West Texas Intermediate crude for May delivery tanked more than 120% to turn negative for the first time in history. WTI traded at negative $3.70 per barrel. Meanwhile international benchmark, Brent crude, which has already rolled to the June contract, traded 8% lower at $25.83 per barrel. The June WTI contract, which expires on May 19, fell about 12% to $22.06 per barrel. The July contract was roughly 5% lower at $28 per barrel. And thus we get to the "running out of space" problem that would have seemed inconceivable back in February. With demand at near-paralysis, oil and fuel tanks around the world are close to brimming... Global oil storage is “rapidly filling – exceeding 70% and approaching operating max,” Steve Puckett, executive chairman of TRI-ZEN International, an energy consultancy, told CNBC earlier this month. I guess at that point they would have to fire sell it. Good for consumers, but it would likely throw the whole financial system into chaos. And by that, I mean even more chaos than it is already in.
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