The price of WTI crude oil collapsed below zero level for the first time in the entire oil history, and this fact will be discussed for a long time by world experts, Azerbaijani expert and researcher at the Oxford Institute for Energy Studies Gulmira Rzayeva told Trend.
Rzayeva, who is also the director of Eurasia Analytics consulting company, was commenting on the upcoming OPEC+ meeting.
According to the researcher, the reason for this was that on the exchanges at the time of falling oil prices, futures trading was not stopped. Transactions with oil futures were floated, as there is a tendency in the world to oversupply the oil produced amid low demand due to the coronavirus pandemic. In the US, storage facilities are filled with oil at 75 percent, and in some regions they are full.
"At the auction, the oil price dropped to a minus level, and WTI was traded at a level below $37. We have witnessed what computer algorithms (trading systems that traders work with on the exchange) are capable of, through which the value of futures is calculated and contracts concluded. These algorithms, guided not by the real situation on the market, but by the numbers set by the owners of futures contracts, drove prices down," Rzayeva said.
"This means that the actual oil price has not sharply dropped, especially to the minus level, although of course the general downward trend is observed. Oil continues to be sold to refineries, traders and companies at an affordable price," she added.
"Nevertheless, the US government will investigate yesterday’s case and find out the true reasons. Today, the price of WTI has already risen, and we must once again take into account that there is implied the price of exchange futures, rather than of a barrel of actual oil in the world market," noted the expert.
According to Rzayeva, the general trend is that oil prices are falling this month not only due to the filling of storage facilities.
"The oil, purchased by such large traders as Bitoil, Gunvor, Trafigura and Shell, is kept without any use in tankers because there is no one to sell it to, and they continue to fill up. Therefore, traders have to sell it at a large discount. The process will continue until the end of this month, as well as in May, when negotiations of OPEC+ countries will take place," the expert said.
"In May, a large jump in oil prices also is not expected, demand is still low. I think, in the coming months, it will depend on the results of negotiations of OPEC + countries. If the parties agree to reduce the oil production, then significant changes may occur in the global oil market. At the moment, oil prices of other brands are traded at plus level," she added.