WTI Plummets towards Zero on Storage Fears [Update]

(Updates on price)

The May contract for West Texas Intermediate was at $0.01/barrel at 18.15 GMT, suggesting that there is now no more storage and crude production must be halted. Very little crude is likely to have traded at these prices and producers will have put in place different hedges to protect them from the catastrophic collapse. But cashflow will dry up, while loans still have to be serviced and leases paid.

Commenting, Norwegian consultancy Rystad said: "Today will mark a shift in the calculus of shale players, who are already selling at a loss to hold on long enough until peers begin to fold. Now, I think we will begin to see even more creative infrastructure solutions to achieve maximum storage capacity.

 "The Department of Energy proposal to start paying shale companies to keep oil in the ground will most certainly be discussed today – it is a creative solution to lower supply, keep some jobs, and prevent a few (but not all) bankruptcies," Rystad said.

The US benchmark crude had traded at a high of $17.39/barrel earlier in the day, the last day of trading for that contract. Gas conversely has risen slightly at the Henry Hub, to $1.85/mn Btu at time of press. Much of the gas is associated with oil production.

The sharp decline in WTI is owing to fears that the Cushing storage hub in Oklahoma, the physical delivery point for WTI futures, could soon be filled, consultancy Rystad had said earlier in the day.