Recently, international oil prices have continued to fall. Due to the serious oversupply in the US oil market, the contract was forced to close before the expiration, and the price of crude oil futures even fell to a negative value. So why is the oil price negative?

Why is the oil price negative?

First of all, affected by the epidemic, the sharp drop in demand led to a surge in inventory, and the market supply and demand were seriously unbalanced, leading to a sharp drop in oil prices. In addition, the contract that plunged this time is the May light crude oil futures contract in the New York Mercantile Exchange, USA, which is about to expire. Under normal circumstances, the price difference between the two crude oil futures contracts will not be too big, but the price difference between the May contract and the June contract of the US crude oil futures, which is about to expire, has exceeded $ 10, resulting in negative oil prices.

Negative oil prices mean that the cost of transporting oil to refineries or storing it has exceeded the value of oil itself, and many small and medium-sized oil companies will face the risk of bankruptcy. However, a negative number does not mean that everyone will pay back the money for free in the future. Only the May light crude oil futures contract, which is about to expire, fell to a negative value, not the spot price of crude oil.