Negative oil prices are real now -Rystad Comments

It’s like trying to explain something that is unprecedented and seemingly unreal! The most simple explanation for negative oil prices is that midstream players are now paying “buyers” to take oil volumes away as the physical storage limit will be reached. And they are paying top dollar!

And what does that mean? That pricey shut-ins or even bankruptcies could now be cheaper for some operators, instead of paying tens of dollars to get rid of what they produce.

Traders have been gobbling up cheap oil and pumping storage full, and now, in the case of WTI and Cushing, storage has reached a physical limit - we estimated earlier today that there was only 21 million barrels of free storage left.

For months, Rystad and many other agencies have been warning about running out of storage in mid-May - this isn’t news to anyone trading oil. Traders that do not have access to storage can no longer accept volume deliveries as the May contract expires.

And those traders that do have access to storage are happy to short the market.

Read the latest issue of the OGV Energy magazine HERE.