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U.S Oil Prices Crashed into Negative Territory

in International Business

U.S Oil Prices Crashed into Negative Territory

Oil price in the U.S has plunged more than 100% to about -$40 as demand dries up and storage capacity dwindles amid the COVID-19 pandemic.

This is the first time in the history of the U.S that oil price has fallen below zero. This means that producers are paying buyers to take the oil off their hands.

This comes despite an Opec-backed deal to slash global crude supply by about 10% earlier this month. The deal was the largest cut in oil production ever to have been agreed.

The oil sector is facing two battles: low demand and in-fighting among producers about reducing output.

Major oil exporting countries-Opec and allies such as Russia- have already agreed to cute production by record amount. The US and other countries have made commercial decisions to cut output. However, cutting down output might not have a major impact as capacity is filling fast on land and at sea.

With extended lockdowns it’s likely to see further decline in oil prices.

Photo credit: Graph is taken from the Financial Times.

Tags assigned to this article:
US oil market

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