InvestorQ : What is meant by negative oil prices? Is it possible for oil to have negative prices?
Moii Chavate made post

What is meant by negative oil prices? Is it possible for oil to have negative prices?

Answer
image
Sam Eswaran answered.
1 year ago
Follow

Saudis have declared an all-out oil war with Russia. Saudi Arabia has the world’s second-largest oil reserves after Venezuela and extremely low production costs. That makes it very easy for them to influence prices by adjusting output. Currently, Saudi produces oil in the range of 10.5 million bpd but could soon raise that to 12.5 million bpd, which could have a huge impact on global prices. Saudi has also started cutting supply price of oil to as low as $30/bbl and even lower. The Coronavirus pandemic has suppressed oil demand in China, Europe and other parts of the world. The only option in front if Saudi Arabia is to flood the markets with oil, as it can afford to do so at a lower cost. Normally, oil finds a support around $25 as countries start stocking oil in their strategic reserves. Negative oil prices means that consumers will be paid to consume oil and that is something like negative interest rates. That is because, once oil is pumped, it has to be consumed or stored elsewhere. If global demand slumps and supply increases, surplus oil will rapidly exceed the storage capacity, forcing producers to pay consumers to buy it off them. This sounds impractical but it is possible.

4 Views