Some Early Views on 'Mind-Bending' Oil Prices

Oil prices remained in turmoil in the US and the world on Tuesday, reports the Wall Street Journal. On Monday, the US benchmark dipped into negative territory for the first time, settling at -$37.63 per barrel. On Tuesday, the price improved, but remained in the red at -$6.30 per barrel. Meanwhile, the international benchmark (Brent crude futures) dropped 15% to $20.67 on Tuesday, the lowest figure in nearly 20 years. Coverage:

• AOC's revised tweet: When news of the historic slide into negative territory broke Monday, progressive Rep. Alexandria Ocasio-Cortez tweeted that "you absolutely love to see it," but then deleted the tweet for what Business Insider calls a more "tempered" response. After calling this a "turning point in the climate movement," the proponent of a Green New Deal wrote: "Fossil fuels are in long-term structural decline. This along w/ low interest rates means it‘s the right time to create millions of jobs transitioning to renewable and clean energy. A key opportunity."

• Not the 'true' price: In some ways, the negative price is an anomaly because of some financial "nuance"—it involves futures contracts, not the price of physical oil, writes Pippa Stevens at CNBC. How the AP explains it: "Trading of contracts for US oil to be delivered in May ends on Tuesday, meaning that the extreme drop does not accurately reflect the long-term view of the value of crude but rather investors' ability to take delivery of it now. The next futures contract, for delivery in June, is considered to now be closer to the 'true' price of crude." But that price is not so great, either: The June price was down to just $16.58 a barrel Tuesday morning.
• Stop the spigots: The chief economist at commodities trader Trafigura puts it this way to the Journal: “This is the market signaling to producers that you need to cut off more production faster because we’re drowning in oil at this point."
• Gas pumps: Sorry, this does not mean you'll be getting free gasoline, notes the Washington Post. The dip into red ink is "fleeting, and symbolic, more than anything, and it won’t have much effect on the price of gasoline at the pump," writes Will Englund. "But it showed just how much the coronavirus pandemic has crushed the world’s energy markets—and how the global effort to stabilize them was failing."
• Quite a deal: At the New York Times, Neil Irwin writes about the "mind-bending" development. "If you happened to be in a position to take delivery of 1,000 barrels of oil in Cushing, Okla., in the month of May—the quantity quoted in the relevant futures contract—you could have been paid a cool $37,630 to do so." And, yes, there's a "technical" market explanation, "but the broader takeaway is that the COVID-19 crisis is an extraordinary deflationary shock to the economy, causing the idling of a vast share of the world’s productive resources." And "the consequences will almost surely persist beyond the period of widespread lockdowns."

(More oil prices stories.)