On April 20, 2020, May contracts for North American oil grades expiring on April 21 tumbled to zero and even went to a negative territory. The negative price of benchmark WTI futures exposes a severe downturn in the US oil industry. In fact, energy investors are alarmed by the roller coaster of oil quotes over the recent couple of months. On April 9, OPEC and its allies settled a long-awaited pact on oil production cuts. The market responded with a moderate rally. However, shortly after oil prices went into a nosedive. To sum up, the beneficial effect of the OPEC+ deal was short-lived. North American grades incurred the heaviest losses. First, May contracts for West Texas Intermediate slumped abruptly to $15 a barrel, the lowest level since late 1990-es. But the bottom was yet to come. As a result of the unprecedented wipeout, WTI futures plunged as deep as minus $40 a barrel. This bizarre twist means that oil producers have piled up their inventories and prefer to pay, so that someone would take out this oil. US drilling companies find it more practical to pay for removing crude oil than to halt drilling rigs or to arrange new storage facilities. Importantly, the oil price turned negative only for May contracts. Contracts for WTI delivery in June are trading higher at nearly $22 a barrel.
