The bizarre movement in the market was exaggerated by a quirk in the way oil prices are set.
Traders pay varying prices depending on the grade of crude, where it comes from, and the date on which it is meant to be delivered. Normally these differences are small, and they go unnoticed outside of the energy market. But on Monday they were exacerbated by sharp swings in the price.
Benchmark US oil prices crashed into negative territory for the first time in history as the evaporation of demand caused by the coronavirus pandemic has left the world awash with oil and not enough storage capacity meaning producers are paying buyers to take it off their hands.
West Texas Intermediate, the US marker, lost more than 250 per cent to trade as low as -$40.32 a barrel in a day of chaos in oil markets. Traders capitulated in the face of limited access to storage capacity across the US, including the country’s main delivery point of Cushing, Oklahoma.
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