Can Crude Oil Prices Slide Into Negative Territory? - Forex News by FX Leaders
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Can Crude Oil Prices Slide Into Negative Territory?

Posted Thursday, April 2, 2020 by
Arslan Butt • 1 min read

Energy analysts worldwide have warned that crude oil prices could fall into negative as global oil storage facilities could reach maximum capacity soon, which could further dent oil demand even as leading producers are heading towards hiking supply this month. With several countries still under lockdown and travel bans in place, the demand for oil has been on the decline over the past few months and is likely to remain weak for some time to come.

Meanwhile, Saudi Arabia had announced its plans to flood the markets with cheap oil to take on Russia after it refused to go along with OPEC’s plans to curb oil supply in the wake of the coronavirus crisis. To prop up demand, countries like the US had committed to shore up their strategic oil reserves, which will be accomplished soon.

In addition, as demand falters, onshore and offshore oil storage space are running out as producers are unable to cut down supply in line with weakening demand. To make matters worse, the three-year pact between OPEC and non-OPEC oil producers expired, which could further boost supply in oil markets.

According to estimates by Goldman Sachs, spare oil storage capacity worldwide is presently around 1 billion barrels. However, high costs could deter producers from shutting down production. It would be more cost effective for them to sell their supply at negative rates and dispose of the stores oil, especially for oil producers in landlocked regions around the world.

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