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Why is Oil Price Negative? What does Negative Price Mean?

Negative Oil Price Explained What does Negative Oil Price Mean

Oil prices have turned negative due to Coronavirus lockdown and it has made shockwaves over the entire world. It will have a huge impact on the global economy and markets will crash for the next few days. But to the common public, it is a surprise which they are not able to digest as to how can the price of a global commodity turns negative and that too for crude oil? What does even negative oil price mean?

Will the oil companies pay to the customers instead of who purchase oils from them? Before you go to the nearest oil station and ask them to fill your tank for free, please read what is the meaning of negative oil price. We have explained the negative oil price in this article and the possible timeframe when it will rise up back again and get normal.

Negative Oil Price Explained: What does Negative Oil Price Mean?

Why is Oil Price Negative What does Negative Price Mean

The global demand for oil has been reduced from 100 million to just 29 million barrels this year. But the major oil producers have only cut the production by 9.7 million barrels per day, which has made a surplus of oil in the market with no buyers. It has lead to many of the countries storing huge amounts of oil at cheaper prices which have increased the storage costs for the extra tankers. But there is no demand for oil as everyone is staying home due to the COVID-19 lockdown.

Meanwhile, crude oil has reached America refineries and other countries where they have to extract, transport and store the oil products. Alberta oil which is typically sold at $10 to $15 has been dropped to a price of -$37 in the share market. It doesn’t mean the oil price has turned negative, it simply states that the oil companies are losing this much amount per barrel as the difference between cost price and selling price has turned opposite.

Oil Prices will Rise when Coronavirus Pandemic Ends

Oil Prices will Rise when Coronavirus Pandemic Ends

Oil prices will keep falling over the next few weeks until the Coronavirus pandemic continues as there are no demands in the market. But once the COVID-19 outbreak is contained and people start driving on the roads, the whole thing will have a huge aftereffect. Most of the companies who are storing the oil will increase the price higher than before to recover from losses and oil will become very expensive.

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Written by Anukriti Ghosh

Though I am a Bioinformatician, my inclination towards content writing is never less than it. I relish doing research, reading, and writing. I can easily jot down, not for me but for my readers. And through this, I wish to bring the best of me to my readers.

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