Behind the great oil collapse
US oil futures crashed below zero due to a storage crisis – but will Brent, benchmark for the rest of the world, follow suit?
US oil prices turned negative for the first time in history on Monday, crashing through the floor to -$40 at one point. It is unprecedented for sure. But so is the simultaneous seizing up of world economies.As governments around the world impose lockdowns to slow the spread of Covid-19, demand for oil has, quite simply, fallen off a cliff. And so has the price.The market is in crisis.That became irrefutable on Monday when the futures price for West Texas Intermediate (WTI), the US benchmark for crude, turned negative, plummeting to -$40 a barrel for May delivery over fears that storage capacity will run out.Primarily, the price crash affected US oil producers, which base their prices on WTI crude. About two-thirds of the world, including SA, mainly use Brent crude oil, on which our petrol prices are based. Though the price of Brent crude didn’t crash, and remains around $20 a barrel, it exposed deeper concerns about the fragility of the entire oil market.Sasol, one of SA’s most wide...
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