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Oil Trades Below Zero Across U.S. as Futures Market Craters

Oil Is Trading Below Zero Across U.S. as Futures Market Craters

(Bloomberg) -- Oil is trading below $0 a barrel across the U.S. after the futures market suffered its worst price crash in history.

Barrels from the country’s biggest shale plays and offshore grades are pricing in negative territory, with buyers asking to be paid for taking crude away.

The meltdown follows the worst day of trading in U.S. history, in which New York oil futures plummeted to an unprecedented negative $37.63 a barrel. The market was already under pressure as storage across the country fills and the coronavirus pandemic obliterates energy demand.

In the U.S. physical crude market, grades like West Texas Intermediate oil in Midland, Texas, Mars Blend, and Southern Green Canyon crudes traded at negative levels on an outright basis, despite a large increase in their premiums to Nymex crude futures. While most of these negative prices were likely transacted in long-term deals, there were spot deals as well, market participants said.

WTI in Midland stood at minus $13.13 a barrel, Mars was at minus $21.63 and SGC at minus $21.88, according to data compiled by Bloomberg on Monday. Bakken crude from North Dakota was worth minus $37.63 a barrel, equivalent to the futures price. That was higher than Alaska North Slope at minus $46.63.

Not every grade suffered as badly. On the Gulf Coast, Light Louisiana Sweet was worth $13.37 a barrel, a whopping $51 premium to futures. California crude prices held up relatively well, with Chevron Corp.’s posted price of Midway-Sunset crude dropping $1.90 to $14.12 a barrel, the lowest since 2002.

Bakken oil producers, landlocked and dependent on pipelines or rail to move their crude to market, are especially vulnerable to the supply glut. With refineries in the U.S. Midwest cutting back production as people stay home and isolate, storage tanks are rapidly filling up.

The biggest U.S. storage hub at Cushing, Oklahoma -- the delivery point of the WTI contract -- has limited room after the volume of oil there jumped 48% to almost 55 million barrels since the end of February.

The market was forewarned that prospects of negative prices wouldn’t spare even Texas, the birthplace of the shale revolution, as companies slashed crude prices in the weeks prior to Monday’s crash. Late last month, Mercuria Energy Group Ltd. bid negative 47 cents a barrel for Wyoming Asphalt Sour.

Enterprise Products Partners LP priced crude streams in Texas and Oklahoma at negative levels, according to its online postings on Monday. Plains Marketing LP, which sets posted prices for grades across 11 states, also set negative levels across the board, ranging from about minus $39 to minus $55 a barrel.

©2020 Bloomberg L.P.