Breaking it Down: What Drove US Crude Oil Prices Below $0?

Explained: How and why crude oil prices have dipped below $0 per barrel and whether India benefits from it.

Explain: How Crude Oil Prices Fell Below $0

(Phioto: Altered by The Quint)

Video Editor: Varun Sharma

US crude oil prices crashed into negative territory for the first time in history on Tuesday, 21 April. The Quint’s Editorial Director Sanjay Pugalia and Energy Expert Amit Bhandari explain why and how this happened and what could be the possible outcome of this on global markets.

“Total oil production globally on a daily basis is around 100 million barrels. Due to the coronavirus crisis, there has been a 30 percent dip in this demand. In such a situation, there is no place to store the 30 barrels of oil not in demand.”

Amit Bhandari, Fellow, Gateway House & Energy Expert

He also added that in a market like America, no company can throw the excessive oil, because it is considered a crime there. So the situation is such that sellers have to pay to deliver oil.

What Next For US?

Bhandari explained that this situation is not expected to remain the same in the next one month. “A good thing about oil production in US is that most of it is produced from shell oil. Shell oil wells have a lifespan of a few weeks. If I am a shell oil company, I will have to drill new wells every few weeks. So if the demand and price are so low, then new drilling will be reduced,” he added.

How Much Will India Benefit from This?

Bhandari said that India purchases more Brent than West Texas Intermediate (WTI), so the negative prices of WTI will hardly impact India.