In historic first, US crude oil price plunges below zero as COVID-19 pandemic hits demands

For the first time ever, US oil prices on Monday crashed below zero as the demands collapsed due to the coronavirus pandemic.

The US marker West Texas Intermediate (WTI) lost over 100%, sinking below zero to -$6.60 a barrel, on May contract, according to Bloomerg.com update at 2:18 pm EDT.

The crash in oil prices came on warnings that crude oil storage could fill up soon as stockpiles continue to build because of the crash in consumption caused by the coronavirus outbreak.

According to AFP, the steep decline was driven by investors closing out their positions ahead of the May contract expiry on Tuesday. Those holding the contracts will have to take physical delivery of the contracts even as they face storage issue.

The international marker Brent crude dropped 7.8% to $25.89.

"The sell-off in near month contract is large because of position squaring ahead of expiry. There are huge stocks in US storage and this has pressurized near-month prices,” Ravindra Rao, VP- Head of Commodity Research at Kotak Securities, said in his comment on falling oil prices.

The storage facilities across the world are exhausted as stockpiles continue to build because of the crash in consumption caused by the coronavirus outbreak.

With the number of COVID-19 cases worldwide crossing 2.4 million and over 167,000 deaths, close to half the world's population is staying home including in India where 1.3 billion people are under strict nationwide lockdown. This has hit the oil demand hard and refineries are not processing crude fast enough to clear the storage.

Reports said that WTI's main US storage facilities in Cushing, Oklahoma, were filling up.