U.S. Gas Prices Hit Record Lows as Crude Oil Futures Crash Below $0 for First Time in History

United States crude oil futures crashed below $0 Monday to go negative for the first time in history, with energy industry experts pointing to uncertainty over coronavirus lockdown demand and a lack of storage space.

Monday's U.S. oil futures plunge caps WTI crude's fall from $64.72 on January 5 of this year to negative $37.59 on April 20. Marketing strategist and commodity trading expert Bob Iaccino told Newsweek Monday the fall is unprecedented and comes just two weeks after Chicago Mercantile Exchange (CME) made emergency changes to even allow trade at negative prices. Several crude oil traders said there is simply no current demand or storage space for May contract deliveries and that orders arriving in the Gulf next week, which were placed months ago, have nowhere to go. The cost of storage and physical transport prices has remained the same despite the drop in demand, meaning buyers are essentially paying sellers not to deliver the oil.

Iaccino and several Texas-based crude oil traders cautioned American drivers that the negative prices reflected in the oil futures contract, which expires tomorrow, does not mean people will literally be paid-out by their local gas pump stations.

"There is an immediate lack of demand for oil coming out of the ground due to the global shelter-in-place orders and right now handlers are better off saying, 'here just take this, get rid of this for me,'" Iaccino told Newsweek. "With prices currently falling below negative $35 to $40 per barrel, this means purchasers could buy 1,000 barrels on credit and receive $35,000 just to take delivery of the crude oil...but you can't just store it in your garage."

Newsweek subscription offers >

Iaccino noted oil barrels must be placed in environmental storage or tanks approved by government regulators as just one of the many factors preventing average potential buyers from stocking up on cheap oil.

Energy trading experts, seeking to illustrate the "anomaly" that has allowed trades to happen below zero dollars, reiterated that storage costs have simply outpaced the current demand.

"While on the surface, a $0 oil price would suggest producers stop production, in theory, it is more economic to pay someone to take the crude rather than shut the well (as there are costs associated with shutting a well) up to the shut in cost," Amrita Sen, Chief oil analyst at Energy Aspects, told Newsweek Monday.

He warned Americans that the dramatic oil futures crash is likely not reflective of the long-term value and that Monday's negative price does not mean drivers "will be paid to fill up their gas tanks." Short-term gas pump prices have already fallen below $1 per gallon in dozens of states. Drivers were paying $2.83 at this same time last year.

Newsweek subscription offers >

Iaccino said he believes oil futures will rebound into the range of $9 to $22 averages seen between 1986 and 2001 as the economy reopens from the coronavirus pandemic lockdown orders. But he said there will almost certainly not be a return above the $33-plus barrel pricing enjoyed in recent years.

Drivers in at least 13 states including Arkansas, Colorado, Iowa, Kansas, Kentucky, Michigan, Mississippi, Missouri, New York, Ohio, Oklahoma, Virginia and Wisconsin have recorded gas pump prices around or below $1 this week. Several states are seeing gas pump prices hit average lows not seen in more than a decade.

June prices and those for the coming months are still hovering around the positive range of $20 per barrel. Several traders told Newsweek Monday that unless the U.S. completely stops using oil—which would mean drivers don't care what gas prices are—they predict a return to relatively normal prices for orders in the coming months.

crude oil price crash storage
Several crude oil traders said there is simply no current demand or storage space for May contract deliveries and that orders arriving in the Gulf next week, which were placed months ago, have nowhere to go. J PAT CARTER / Contributor/Getty Images
U.S. Gas Prices Hit Record Lows as Crude Oil Futures Crash Below $0 for First Time in History | U.S.