U.S. Commission begins investigation into record drop in oil price to minus $ 38

Source : 112 Ukraine

On Monday, April 20, the price of WTI crude oil fell by hundreds of percent, which is the lowest ever
20:17, 25 April 2020

The U.S. Commodity Futures Trading Commission (CFTC) begins an investigation into the oil crisis on April 20, during which the price of US WTI crude oil fell hundreds of percent to the lowest ever. It fell to almost minus $ 40 per barrel. This was reported by Reuters.

“We need to understand why that pricing happened at that place, at that time,” Dan Berkovitz, a commissioner at the derivatives regulator told.

“In a situation like this one, we look at all possible explanations, but we will take a close look here because of the extreme price move.”

Crude has slumped over 70% this year on a price war between major producers Saudi Arabia and Russia and a demand slowdown caused by the coronavirus outbreak. By Monday, oil traders were awash with supply and struggling to find enough ships, railcars and pipelines to store fuel.

The situation was compounded as the West Texas Intermediate crude benchmark May contract headed into expiry the following day, meaning traders would have to take delivery of yet more oil. At one point, physical traders were paying $40 per barrel to anyone who would take the oil off their hands.

That pushed the contract below $0 for the first time in history, settling at negative $37.63.

Related: Trump gets the oil deal he wants by staying on the sidelines

Earlier, OPEC member countries finally agreed on the final version of the deal to reduce oil production to stabilize world prices.

The main points of the historical agreement are as follows:

1. The largest oil-producing states will reduce production by 9.7 million barrels per day from May to June this year. Quotas of the Russian Federation and Saudi Arabia are 2.5 million for each.

2. In total, starting May 1, 2020, OPEC member countries and their partners will reduce production to 19 million barrels per day. This will happen in stages, first in May-June, then in July-December, and then after the next revision of the agreement.

3. Mexico initially abandoned its quota, according to which it should have reduced 400 000  barrels of oil. As a result, the Mexicans agreed to 100 000, and the United States took over the remaining 300 000.

4. In July-December, there will be another reduction, as expected by 7.7 million barrels per day. And in December 2020 - May 2022, another one – by 5 million barrels.

Related: Price of American WTI oil for the first time in history fell below zero


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