The West Texas Intermediate (WTI) crude May futures shocked markets in late Monday trading as they fell below $0 to lows of -$37.63 per barrel. The historic lows were due to traders avoiding getting stuck with crude oil with limited storage facilities with concerns about how much oil the US can store as demand shrinks.

Actually, the price touched about -$40 per barrel at the New York Mercantile Exchange (NYMEX) as traders rushed to get rid of their positions on the last day of trade. In this case, the WTI May Futures contract closes on Tuesday 21 April retreating to the worst levels since NYMEX opened oil futures trading in 1983. 

The COVID19 pandemic has worsened global oil demand with analysts approximating a 30% slump in global demand. The decline in energy markets comes amid the covid19 crisis which has led to the closure of factories and businesses across the globe and there are no cars on the roads due to lockdowns.

Further, the unprecedented production hikes by Russia and Saudi Arabia flooded the markets with oil thus accelerating the fall in prices. With about a month of oversupply, storage facilities are already close to full thus with no additional capacity to store oil, WTI futures traders panicked leading to the bloodbath witnessed in the US oil market.

As a mitigation measure, the US immediately announced that it will be filling up its National reserves to capacity with 75 Million Barrels.

The $1/barrel is a trading dynamic when there are many sellers and limited buyers. However, the rest of the forward curve remains stable as June WTI traded above $21 per barrel while July WTI lost 15.82% to $21.13 per barrel. International benchmark Brent remained in positive territory as it lost 7.59% to go for $25.92 per barrel.