Oil prices have been in a sharp decline since the coronavirus spread began early this year, dropping as global production far outpaced demand. Once the United States went largely on lockdown, U.S. gasoline and diesel fuel demand collapsed, leading to a glut of crude oil and its products.
U.S. drillers largely continued to produce at their normal rate, filling up storage across the country. This crisis came to a head this week as the May futures contract went into expiration. When the contract expires, investors holding the contract receive 1,000 barrels of oil delivered in Cushing, OK, a major oil transportation hub. This month, storage was already overwhelmed in Cushing, leaving nowhere for the oil deliveries to go.
On Monday, the day before expiration, prices started near $18 per barrel, but quickly fell to $10 per barrel by mid-morning as traders and investors vied to sell off their holdings and avoid taking physical delivery. The sell-off turned to a fever pitch with oil falling under $1 per barrel by midday, a sign that nobody wanted it. By the afternoon, people were so desperate to avoid delivery that they pushed the price below zero. In essence, they were paying someone else to take their oil. At the most extreme, traders paid over $40 per barrel to get rid of their oil, an unheard-of phenomenon.
As the May contract expired, June futures began falling as well in anticipation of a similar problem next month, with prices dropping as low as $6.50 per barrel. To solve this issue, American demand will need to rebound or U.S. oil producers will need to drastically reduce their output.
**Farmers Ready to Plant Corn
Farmers across the Midwest are in full swing, planting this year’s corn crop. Snow and wet weather slowed field work over the past few weeks, but many are seeing better conditions this week, helping them catch up.
The U.S. Department of Agriculture will release its weekly planting tally on Monday, showing current progress.
Producers have a narrow window to get corn into the ground between spring snows and summer heat, making the next month’s weather vital to the size of this year’s crop.
As they plant, farmers are eying the corn price, which fell to ten-year low this week at $3.01 per bushel.