Daisy Creager | The Journal Record
Oil futures dropped below zero for the first time in history Monday as the coronavirus pandemic continues to weaken demand amid concerns U.S. storage is near capacity.
Not surprisingly, shares of several publicly held oil and gas producers in Oklahoma fell Monday. Shares of Devon Energy fell 0.65% to $9.16; Continental Resources shares fell 4.46% to $10.72; Chesapeake Energy shares fell 0.48% to $14.38; and SandRidge Energy stock fell 10% to $1.08 per share.
West Texas Intermediate, the benchmark grade for U.S. crude, fell $55.90 a barrel for May to negative $37.63 on the New York Mercantile Exchange, while June WTI fell $4.60 to $20.43 a barrel. July WTI fell $3.14 to $26.28 a barrel.
Analysts consider the June price of $20.43 a barrel to be closer to the “true” price of oil. Crude to be delivered next month, meanwhile, is running up against a stark problem: Traders are running out of places to keep it, with storage tanks close to full amid a collapse in demand as factories, automobiles and airplanes sit idled around the world.
Tanks at a key energy hub in Oklahoma could hit their limits within three weeks, according to Chris Midgley, head of analytics at S&P Global Platts. Because of that, traders are willing to pay others to take that oil for delivery in May off their hands, so long as they also take the burden of figuring out where to keep it.
“Almost by definition, crude oil has never fallen more than 100%, which is what happened today,” said Dave Ernsberger, global head of pricing and market insight at S&P Global Platts.
“I don’t think any of us can really believe what we saw today,” he said. “This kind of rewrites the economics of oil trading.”
Jake Dollarhide, chief executive officer of Tulsa-based Longbow Asset Management, said while the drop is certainly driven by recent COVID-19 market forces, it is possibly an artificial price drop driven by a technical problem or single bad trade, causing a “flash crash” that will recover quickly.