* Expiring front-month May WTI falls to lowest on record
* U.S. May-June futures spread hits widest on record
* Global supply-demand imbalance driving down prices
* European first-quarter corporate earnings seen down 22%
(Adds context, commentary)
By Stephanie Kelly
NEW YORK, April 20 (Reuters) - U.S. crude oil futures
collapsed below $0 on Monday for the first time in history, amid
a coronavirus-induced supply glut, ending the day at a stunning
minus $37.63 a barrel as desperate traders paid to get rid of
oil.
Brent crude, the international benchmark, also slumped, but
that contract was nowhere near as weak because more storage is
available worldwide.
While U.S. oil prices are trading in negative territory for
the first time ever, it is unclear whether that will trickle
down to consumers, who typically see lower oil prices translate
into cheaper gasoline at the pump.
As billions of people around the globe stay home to slow the
spread of the novel coronavirus, physical demand for crude has
dried up, creating a global supply glut.
Traders fled from the expiring May U.S. oil futures contract
in a frenzy on Monday with no place to put the crude, but the
June WTI contract CLc2 settled at a much higher level of
$20.43 a barrel. "Normally this would be stimulative to the economy around
the world," said John Kilduff, partner at hedge fund Again
Capital LLC in New York. "It normally would be good for an extra
2% on the GDP. You're not seeing the savings because no one is
spending on the fuels."
The May U.S. WTI contract CLc1 fell $55.90, or 306%, to
settle at a discount of $37.63 a barrel after touching an
all-time low of -$40.32 a barrel. Brent LCOc1 was down $2.51,
or 9%, to settle at $25.57 a barrel.
"It's like trying to explain something that is unprecedented
and seemingly unreal," said Louise Dickson, oil markets analyst
at Rystad Energy. "Pricey shut-ins or even bankruptcies could
now be cheaper for some operators, instead of paying tens of
dollars to get rid of what they produce."
Refiners are processing much less crude than normal, so
hundreds of millions of barrels have gushed into storage
facilities worldwide. Traders have hired vessels just to anchor
them and fill them with the excess oil. A record 160 million
barrels is sitting in tankers around the world. U.S. crude stockpiles at Cushing rose 9% in the week to
April 17, totaling around 61 million barrels, market analysts
said, citing a Monday report from Genscape.
The spread between May and June at one point widened to
$60.76, the widest in history for the two nearest monthly
contracts.
Investors bailed out of the May contract ahead of expiry
later on Monday because of lack of demand for the actual oil.
When a futures contract expires, traders must decide whether to
take delivery of the oil or roll their positions into another
futures contract for a later month.
Usually this process is relatively uncomplicated, but this
time there are very few counterparties that will buy from
investors and take delivery of the oil. Storage is filling
quickly at Cushing in Oklahoma, which is where the crude is
delivered. EIA/S
"The storage is too full for speculators to buy this
contract, and the refiners are running at low levels because we
haven't lifted stay-at-home orders in most states," said Phil
Flynn, an analyst at Price Futures Group in Chicago. "There's
not a lot of hope that things are going to change in 24 hours."
Prices have been pressured for weeks with the coronavirus
outbreak hammering demand while Saudi Arabia and Russia fought a
price war and pumped more. The two sides agreed more than a week
ago to cut supply by 9.7 million barrels per day (bpd), but that
will not quickly reduce the global glut.
Saudi Arabia is considering applying oil cuts as soon as
possible, rather than starting from May, a Wall Street Journal
reporter said on Twitter, citing sources. Brent oil prices have collapsed around 60% since the start
of the year, while U.S. crude futures have fallen around 130% to
levels well below break-even costs necessary for many shale
drillers. This has led to drilling halts and drastic spending
cuts.
MORE DATA SPARKS GLOBAL ECONOMIC CONCERNS
Weak global economic data also pressured prices. The German
economy is in severe recession and recovery is unlikely to be
quick as coronavirus-related restrictions could stay in place
for an extended period, the Bundesbank said. Japanese exports declined the most in nearly four years in
March as U.S.-bound shipments, including cars, fell at their
fastest rate since 2011. U.S. oilfield services giant Halliburton Co HAL.N on
Monday reported a $1 billion first-quarter loss on charges and
outlined the largest budget cut yet among top energy
companies.