<p>This isn't the "oil price" that's going negative; it's the price of WTI Oil Futures contracts for May. WTI Futures contracts mean taking <strong>physical delivery</strong> in <a href="https://en.wikipedia.org/wiki/Cushing,_Oklahoma" rel="noreferrer">Cushing, Oklahoma</a> (the hub of the US pipeline network).</p>

<p>Many, many contracts was signed some time back, for the seller (at a <em>future</em> date, hence <em>futures</em>) to deliver X barrels of <em>oil</em> to Cushing and for the buyer to take it off their hands there (or it becomes toxic waste). These contracts can be bought and sold like stocks. Right now, storage is full, transport is hamstrung by the quarantine and no one wants that oil due to a collapse in demand, so the <strong>speculators</strong> who own those futures are paying people to take that liability off their hands, by selling these <em>futures</em> at a negative price.</p>

<p>Note that this is only for May 2020 (for now). WTI Futures contracts for June and July are currently trading for ~ 20/26 per barrel respectively, because the market expects the quarantines to be over by then and the demand to pick up.</p>

CC BY-SA 4.0
2020-04-21T18:18:33.087Z
Precisely what I said
Frank
CC BY-SA 4.0
2020-04-22T03:25:21.973Z
You're right. Should actually read other answers before writing my own lol.
Eugene
CC BY-SA 4.0
2020-05-09T14:35:49.267Z
@Frank: Sort of. This answer explains better *which* oil futures went negative.
fantastic peace and prosperity
CC BY-SA 4.0
2020-04-21T17:51:13.500Z
2020-04-22T16:11:04.720Z
2020-04-22T16:11:04.720Z
Eugene
<p>The oil spot price didn't go negative, this was future contract price.</p>

<p>Basically the future contract expires at a certain date and they have to take delivery. The futures owners were dumping because the price of storage if they had to take delivery would have been very high, or even impossible.</p>

<p>The people buying back the future contracts (at negative prices) were likely the very same people producing it. (OPEC+, Russia, US shale)</p>

<p>So you have a situation where oil producers are being paid briefly not to deliver on their futures.</p>

CC BY-SA 4.0
2020-04-21T14:10:37.533Z
It seems you are contradicting yourself. If a producer can by its own future contract at a gain, without having tu pump the oil off the ground, it's a total win situation. This would push the demand from producers to buy near-to-expiration future contracts, which will ensure the price never reaches negative territory.
chatGPT
CC BY-SA 4.0
2020-04-21T15:07:46.333Z
And what happens when that near-to-expiration date arrives, and the contract expires, but the producer *still* doesn't have any place to put all the extra oil? Does the person he paid for that contract give him his money back for some reason? @Explain_this_to_me
Lee Mosher
CC BY-SA 4.0
2020-04-21T16:50:18.713Z
Demand from producers should rise the equilibrium price.
chatGPT
CC BY-SA 4.0
2020-04-21T19:31:23.607Z
As price goes negative, demand increase, adding pressure for the price to... go up, until it reaches... zero. Negative prices ruled out. My brain is very engaged my dear friend.
chatGPT
CC BY-SA 4.0
2020-04-21T22:01:21.817Z
"The people buying back the future contracts (at negative prices) were likely the very same people producing it. (OPEC+, Russia, US shale)" and "Apart from maybe to prevent production by allowing producers to buy their own promises. " Aren't you contradicting again? Please clarify your thoughts and stop being aggresive. This is a respectable forum, not reddit.
chatGPT
CC BY-SA 4.0
2020-04-22T01:07:30.887Z
@Frank your comments here are not nice to read.. It might be sensible for you to re-read the code of conduct, and perhaps take a break before commenting again. There’s no need to be unpleasant to anyone. We’re here to help others, but if you can’t do that civilly, please don’t.
Tim
CC BY-SA 4.0
2020-04-22T05:57:41.617Z
@Explain_this_to_me Demand for negative priced contracts just means the negative price would not drop a great deal further. The sellers were trying desperately to avoid taking delivery. So, they paid the buyers to take it off their hands. It is as simple as that. You insist that economics dictates that that situation is however impossible. I think you need to explain exactly why that is the case.
Frank
CC BY-SA 4.0
2020-04-21T08:40:36.823Z
2020-04-21T08:40:36.823Z
Frank
<blockquote>
<p>News say it is because sellers cannot sell it. But, why don't they just hoard it until the coronavirus crisis is off?</p>
</blockquote>
<p>They can't because their oil storage facilities have a limited capacity.</p>
<p>According to <a href="https://www.spiegel.de/wirtschaft/soziales/oelpreis-erstmals-negativ-globaler-nervenkrieg-a-0b0f7c18-59ea-4712-9d3d-40e6f5bb6245" rel="nofollow noreferrer">this German article from Spiegel Online</a>, there is currently less demand for oil than there is production. Oil wells are pumping oil which they can not sell and it is overflowing their stores. They need to get rid of it.</p>
<p>Why don't they just stop pumping, then?</p>
<ul>
<li>Some oil companies are in destructive competition with each other. By keeping the oil prices low, they hope that their competition will run out of money before they do and then they can take over the market for themselves.</li>
<li>For mechanical reasons, some oil fields simply <em>can not</em> stop producing oil. When they stop pumping, then the pressure in the natural oil reservoirs might recede to a level where pumping is no longer possible with their current equipment and they might not be able to resume it later without considerable new drilling efforts.</li>
<li>The fracking industry in the United States is expecting free money from the government in form of bailouts, and if they stop producing, that might disqualify them. Also, that industry is used to running a deficit for years. They are working on growing their production capacities in the long run in order to gain a dominant market position in the future when cheaper oil sources run out and they become economically viable.</li>
</ul>
<blockquote>
<p>Alternatively, I would like to get paid for receiving a barrel of oil (I can keep it in my back garden) and then sell it in the future.</p>
</blockquote>
<p>It might not be worth the cost of doing business for you.</p>
<ul>
<li>Oil barrels are heavy. Have you considered the cost for the delivery to and from your premise? I don't know the price list of your local postal service, but I am sure that package and delivery for a 300 pound barrel of hazardous material might really dig into your profit margin.</li>
<li>Do you fulfill the legal requirements to store hazardous and possibly environmentally disastrous chemicals like crude oil on your premise? You didn't say where you live, but in most countries it would be illegal to do that without serious precautions to prevent an oil spill. Converting your garden shack into an up-to-code oil storage facility might get pretty expensive... if you are allowed to do that in a residential area at all.</li>
</ul>
<p>I would expect that even in the current situation, running a crude oil storage facility is only profitable if you can benefit from economies of scale - if you are able to store a couple hundred to a couple thousand barrels of oil at a time. And if you are in a location where it actually makes economic sense to store oil (near facilities which produce or consume crude oil).</p>

CC BY-SA 4.0
2020-04-22T10:31:46.573Z
2020-04-22T11:21:44.443Z
2020-06-17T09:40:54.643Z
Philipp
<p>This negative price is caused by greedy countries. </p>

<p>The usual worldwide oil demand is about 100 million barrels a day. Now, because of the Corona crisis, demand is about 30 percent down, so, ideally, the world oil production should be lowered with about 30 million barrels per day. So far, however, worldwide production only got 10 percent lower. </p>

<p>The BIG question is, who (which country) should reduce production? The biggest producer is Saudi Arabia, and they indeed reduced production, and called upon other producers to do the same, in the OPEC meetings. They (SA) don't have that much pain, SA is filthy rich, and can afford to keep the oil underground for future production, when prices are up again.</p>

<p>But how about other countries? Most countries do fun things with their oil dollars, like stimulate their economies. When they reduce production, they get into an economic crisis. Also, they produce smaller amounts than SA, so they figure, yes, we agree that production should go down, but no, we keep producing the same for a little while longer to not get into a financial crisis too soon. Or, because meanwhile oil prices are already much lower because of lower demand due to Corona, they even increase production, to make up for those lower prices.</p>

<p>This is called Greed. You don't care about the common cause of keeping oil price up for the benefit of your OPEC friends. You don't care that oil is already a finite resource and you don't lower production to save some oil for your grandchildren. You don't care of the air getting much cleaner and getting a little bit less global warming. No, you keep pumping like crazy for just a few lousy dollars.</p>

<p>The rest is history. You can't go on forever pumping 20 million barrels more than demand. Storage, meaning above ground storage, is very finite, and got full. Nobody will buy your oil, even at zero price.</p>

<p>The obvious solution is to store surplus oil underground, where it sat at no cost for hundreds of million years.</p>

<p>Arguments that production could not be stopped due to pressure buildup or so are moot, as the oil prices are down for many weeks now, and there was plenty time to calmly reduce production.</p>

<p>You may argue that the negative price could have been prevented to reduce production just one day earlier, because indeed you cannot close the valve in five minutes. But that ignores the fact that the negative price is just a result of a downwards trend ignored for weeks. Any downward trend will eventually cross the zero. Producers should have reduced production at the first signs of lower world oil prices, weeks ago, and argued that oil is a precious resource that you can only produce and consume once in 300 million years, and should be produced only in times of high prices. Producing precious oil for (positive) low prices is just scandalous, to say the least.</p>

<hr>

<p>Update with a technical non-political aspect:</p>

<p>Today in the news, 9 hours ago: </p>

<p>Before the coast of California, for over a week 35 fully loaded oil tankers are waiting to be unloaded. They carry about 20 million barrels of crude oil, corresponding to about 20 percent of worldwide dayly pre-corona oil demand.</p>

<p>end quote</p>

<p>Imagine the cost of storing oil this way. If you could empty those ships now, you could earn some serious money.</p>

<p>If this was about mineral water imported from Europe (Vitel, Spa), the ships could just dump to the sea. But this is oil...</p>

CC BY-SA 4.0
2020-04-22T15:49:48.187Z
2020-04-23T08:10:12.650Z
2020-04-23T08:10:12.650Z
Roland
<p>I don't understand why the price of oil futures went negative today.</p>

<p><a href="https://i.sstatic.net/bRXBI.png" rel="noreferrer"><img src="https://i.sstatic.net/bRXBI.png" alt="A graph showing price per barrel suddenly dropping to negative numbers"></a></p>

<ol>
<li><p>News say it is because sellers cannot sell it. But, why don't they just hoard it until the coronavirus crisis is off? </p></li>
<li><p>Why don't speculators jump in and bring up the demand again to positive?</p></li>
<li><p>Alternatively, I would like to get paid for receiving a barrel of oil (I can keep it in my back garden) and then sell it in the future.</p></li>
</ol>

CC BY-SA 4.0
2020-04-20T23:31:43.470Z
Key point: that is not a physical oil price, rather the first futures contract. Probably should be noted in the question, as that is an important component of the event. At the time of the event, the first futures contract is about to expire.
Brian Romanchuk
CC BY-SA 4.0
2020-04-20T23:54:58.683Z
As I understand, they can't hoard it because building storage costs money... and paying people to take the oil away is cheaper than that. I don't know why they can't simply stop extraction though.
prash
CC BY-SA 4.0
2020-04-21T01:45:20.200Z
of course! corrected
chatGPT
CC BY-SA 4.0
2020-04-21T07:37:30.103Z
@prash - If you turn off the taps, pressure builds up and you get an explosion.
Richard
CC BY-SA 4.0
2020-04-21T07:56:49.700Z
[This story](https://thedailywtf.com/articles/Special-Delivery) illustrates well why some companies don't want to have the oil even if it was for free. The story is about coal, but it's the same: most companies trading in large quantities of bulk material are only trading them virtually, they don't have the infrastructure to physically store and transport it. Getting that oil or coal or whatever actually delivered to them and dumped in front of their office building will cost them much more than how much those goods are actually worth.
vsz
CC BY-SA 4.0
2020-04-21T09:44:09.480Z
Apart from my answer I want to add that what we are seeing here is largely the result of aggressive US shale development resulting in pretty ambivalent and uncooperative responses from Saudi and Russia. Basically what we have here is a an oil produce community not particularly interested in reducing production while there is an excuse (C19) to point at as an explanation why oil prices are so low that US shale companies will likely go bust. So, this is a political war really. And a lot of what the US gov and Fed are doing (junk bond purchases eg) is aimed essentially at nationalising US shale.
Frank
CC BY-SA 4.0
2020-04-21T14:13:20.377Z
@prash producers can buy the contracts themselves and ... not extract the oil! This would leave price in the positive territory.
chatGPT
CC BY-SA 4.0
2020-04-21T15:14:27.777Z
Related on Money.SE: [What does it mean for the price of oil to be negative?](https://money.stackexchange.com/q/124269/22489)
Andrew T.
CC BY-SA 4.0
2020-04-21T17:30:24.067Z
You can bet that students will studying this in their college Econ courses a hundred years from now...
RBarryYoung
CC BY-SA 4.0
2020-04-21T19:19:29.640Z
You say "hoard it" like that is easy; if I gave you a thousand barrels of crude oil right now, how would you hoard it?  Really, *how*? In your back garden?
Eric Lippert
CC BY-SA 4.0
2020-04-22T06:02:28.907Z
@Explain_this_to_me what makes you think that demand for negative priced contracts would make the price positive? That's the logical equivalent of saying that demand for water in a market economy will always cause a drought.
Frank
CC BY-SA 4.0
2020-04-22T14:19:53.937Z
@Frank Say I install a stall selling lemonade at a negative price. "Take your lemonade and also take one dollar people!" I would have everyone coming to my stand, perhaps not even for the lemonade itself but for the dollar only. They could resell the lemonade elsewhere. Well, If I am "smart", I could instead give the lemonade and 50 cents. Or maybe 25 cents. Or maybe 0 cents. Free lemonade only. I will still have great demand. That's the market working, ruling out negative prices. Please explain the drought analogy. I see no relation.
chatGPT
CC BY-SA 4.0
2020-04-22T17:21:37.650Z
@Explain_this_to_me The analogy doesn't apply. We aren't talking about selling lemonade, but future contracts. And your customers are people who can't drink lemonade. And they are locked into a future contract. And they have nowhere to put it. So yeah, that doesn't work. Your lemonade analogy would be best made if you the lemonade seller were buying back the future contracts. Ie the producer buys them at negative prices.
Frank
CC BY-SA 4.0
2020-04-23T07:57:20.197Z
@Frank Sorry, mistake, my comment was to ExplainToMe. I will replace may comment, and, eventually, remove this comment which is of no value to anybody else :-)
Roland
CC BY-SA 4.0
2020-04-23T07:58:13.227Z
@Explain_this_to_me Nice try, but what if there is no demand for your cheap lemonade, and at the end of the day you have a lot of lemonade left, and you sister is still busy brewing more lemonade in the kitchen, and you have no more storage left? You cannot make people drink if they are not thirsty, even at a low price. This is the free market. You can also not force people to take away your lemonade at the price that you like, you'll have to negotiate the price, which may turn out to be positive or negative.
Roland
CC BY-SA 4.0
2020-04-23T08:46:12.463Z
@Explain_this_to_me Essentially what you are saying is that producers should buy their own future contract, to produce oil to themselves, at a positive price, when people are willing to dump their oil and pay you to take it. And you say that these producers will willingly do this, because of 'market forces'?
Frank
CC BY-SA 4.0
2020-04-23T15:59:50.207Z
I haven't seen it mentioned here yet, but "barrel" is just a unit. They're not literally including a convenient metal barrel in the pricing. You'd need to buy your own barrels, or have a storage tank before you can take delivery (the EPA frowns on just dumping crude oil in your back-yard pool).
Josh Eller
CC BY-SA 4.0
2020-04-24T06:18:37.300Z
@JoshEller I wonder how much value, if any, there would be in inventing a jetplane that runs directly on crude.
Frank
<price><commodities><oil>
Why is the oil future price negative?
chatGPT
# Why is the oil future price negative?

(Asked by: username_0 on 2020-04-20)

I don't understand why the price of oil futures went negative today.

[![A graph showing price per barrel suddenly dropping to negative numbers](https://i.sstatic.net/bRXBI.png)](https://i.sstatic.net/bRXBI.png)

1. News say it is because sellers cannot sell it. But, why don't they just hoard it until the coronavirus crisis is off?
2. Why don't speculators jump in and bring up the demand again to positive?
3. Alternatively, I would like to get paid for receiving a barrel of oil (I can keep it in my back garden) and then sell it in the future.

**Tags:** price, commodities, oil

> **Comments:**
> **username_1**: Key point: that is not a physical oil price, rather the first futures contract. Probably should be noted in the question, as that is an important component of the event. At the time of the event, the first futures contract is about to expire.  
> **username_2**: As I understand, they can't hoard it because building storage costs money... and paying people to take the oil away is cheaper than that. I don't know why they can't simply stop extraction though.  
> **username_0**: of course! corrected  
> **username_3**: @username_2 - If you turn off the taps, pressure builds up and you get an explosion.  
> **username_4**: [This story](https://thedailywtf.com/articles/Special-Delivery) illustrates well why some companies don't want to have the oil even if it was for free. The story is about coal, but it's the same: most companies trading in large quantities of bulk material are only trading them virtually, they don't have the infrastructure to physically store and transport it. Getting that oil or coal or whatever actually delivered to them and dumped in front of their office building will cost them much more than how much those goods are actually worth.  
> **username_5**: Apart from my answer I want to add that what we are seeing here is largely the result of aggressive US shale development resulting in pretty ambivalent and uncooperative responses from Saudi and Russia. Basically what we have here is a an oil produce community not particularly interested in reducing production while there is an excuse (C19) to point at as an explanation why oil prices are so low that US shale companies will likely go bust. So, this is a political war really. And a lot of what the US gov and Fed are doing (junk bond purchases eg) is aimed essentially at nationalising US shale.  
> **username_0**: @username_2 producers can buy the contracts themselves and ... not extract the oil! This would leave price in the positive territory.  
> **username_6**: Related on Money.SE: [What does it mean for the price of oil to be negative?](https://money.stackexchange.com/q/124269/22489)  
> **username_7**: You can bet that students will studying this in their college Econ courses a hundred years from now...  
> **username_8**: You say "hoard it" like that is easy; if I gave you a thousand barrels of crude oil right now, how would you hoard it?  Really, *how*? In your back garden?  
> **username_5**: @Explain_this_to_me what makes you think that demand for negative priced contracts would make the price positive? That's the logical equivalent of saying that demand for water in a market economy will always cause a drought.  
> **username_0**: @username_5 Say I install a stall selling lemonade at a negative price. "Take your lemonade and also take one dollar people!" I would have everyone coming to my stand, perhaps not even for the lemonade itself but for the dollar only. They could resell the lemonade elsewhere. Well, If I am "smart", I could instead give the lemonade and 50 cents. Or maybe 25 cents. Or maybe 0 cents. Free lemonade only. I will still have great demand. That's the market working, ruling out negative prices. Please explain the drought analogy. I see no relation.  
> **username_5**: @Explain_this_to_me The analogy doesn't apply. We aren't talking about selling lemonade, but future contracts. And your customers are people who can't drink lemonade. And they are locked into a future contract. And they have nowhere to put it. So yeah, that doesn't work. Your lemonade analogy would be best made if you the lemonade seller were buying back the future contracts. Ie the producer buys them at negative prices.  
> **username_9**: @username_5 Sorry, mistake, my comment was to ExplainToMe. I will replace may comment, and, eventually, remove this comment which is of no value to anybody else :-)  
> **username_9**: @Explain_this_to_me Nice try, but what if there is no demand for your cheap lemonade, and at the end of the day you have a lot of lemonade left, and you sister is still busy brewing more lemonade in the kitchen, and you have no more storage left? You cannot make people drink if they are not thirsty, even at a low price. This is the free market. You can also not force people to take away your lemonade at the price that you like, you'll have to negotiate the price, which may turn out to be positive or negative.  
> **username_5**: @Explain_this_to_me Essentially what you are saying is that producers should buy their own future contract, to produce oil to themselves, at a positive price, when people are willing to dump their oil and pay you to take it. And you say that these producers will willingly do this, because of 'market forces'?  
> **username_10**: I haven't seen it mentioned here yet, but "barrel" is just a unit. They're not literally including a convenient metal barrel in the pricing. You'd need to buy your own barrels, or have a storage tank before you can take delivery (the EPA frowns on just dumping crude oil in your back-yard pool).  
> **username_5**: @JoshEller I wonder how much value, if any, there would be in inventing a jetplane that runs directly on crude.  

---

## 4 answers

### Answer by username_11 on 2020-04-21. Score: 21

This isn't the "oil price" that's going negative; it's the price of WTI Oil Futures contracts for May. WTI Futures contracts mean taking **physical delivery** in [Cushing, Oklahoma](https://en.wikipedia.org/wiki/Cushing,_Oklahoma) (the hub of the US pipeline network).

Many, many contracts was signed some time back, for the seller (at a *future* date, hence *futures*) to deliver X barrels of *oil* to Cushing and for the buyer to take it off their hands there (or it becomes toxic waste). These contracts can be bought and sold like stocks. Right now, storage is full, transport is hamstrung by the quarantine and no one wants that oil due to a collapse in demand, so the **speculators** who own those futures are paying people to take that liability off their hands, by selling these *futures* at a negative price.

Note that this is only for May 2020 (for now). WTI Futures contracts for June and July are currently trading for ~ 20/26 per barrel respectively, because the market expects the quarantines to be over by then and the demand to pick up.

> **Comments:**
> **username_5**: Precisely what I said  
> **username_11**: You're right. Should actually read other answers before writing my own lol.  
> **username_12**: @username_5: Sort of. This answer explains better *which* oil futures went negative.  

---

### Answer by username_5 on 2020-04-21. Score: 9

The oil spot price didn't go negative, this was future contract price.

Basically the future contract expires at a certain date and they have to take delivery. The futures owners were dumping because the price of storage if they had to take delivery would have been very high, or even impossible.

The people buying back the future contracts (at negative prices) were likely the very same people producing it. (OPEC+, Russia, US shale)

So you have a situation where oil producers are being paid briefly not to deliver on their futures.

> **Comments:**
> **username_0**: It seems you are contradicting yourself. If a producer can by its own future contract at a gain, without having tu pump the oil off the ground, it's a total win situation. This would push the demand from producers to buy near-to-expiration future contracts, which will ensure the price never reaches negative territory.  
> **username_13**: And what happens when that near-to-expiration date arrives, and the contract expires, but the producer *still* doesn't have any place to put all the extra oil? Does the person he paid for that contract give him his money back for some reason? @Explain_this_to_me  
> **username_0**: Demand from producers should rise the equilibrium price.  
> **username_0**: As price goes negative, demand increase, adding pressure for the price to... go up, until it reaches... zero. Negative prices ruled out. My brain is very engaged my dear friend.  
> **username_0**: "The people buying back the future contracts (at negative prices) were likely the very same people producing it. (OPEC+, Russia, US shale)" and "Apart from maybe to prevent production by allowing producers to buy their own promises. " Aren't you contradicting again? Please clarify your thoughts and stop being aggresive. This is a respectable forum, not reddit.  
> **username_14**: @username_5 your comments here are not nice to read.. It might be sensible for you to re-read the code of conduct, and perhaps take a break before commenting again. There’s no need to be unpleasant to anyone. We’re here to help others, but if you can’t do that civilly, please don’t.  
> **username_5**: @Explain_this_to_me Demand for negative priced contracts just means the negative price would not drop a great deal further. The sellers were trying desperately to avoid taking delivery. So, they paid the buyers to take it off their hands. It is as simple as that. You insist that economics dictates that that situation is however impossible. I think you need to explain exactly why that is the case.  

---

### Answer by username_15 on 2020-04-22. Score: 5

> News say it is because sellers cannot sell it. But, why don't they just hoard it until the coronavirus crisis is off?

They can't because their oil storage facilities have a limited capacity.

According to [this German article from Spiegel Online](https://www.spiegel.de/wirtschaft/soziales/oelpreis-erstmals-negativ-globaler-nervenkrieg-a-0b0f7c18-59ea-4712-9d3d-40e6f5bb6245), there is currently less demand for oil than there is production. Oil wells are pumping oil which they can not sell and it is overflowing their stores. They need to get rid of it.

Why don't they just stop pumping, then?

* Some oil companies are in destructive competition with each other. By keeping the oil prices low, they hope that their competition will run out of money before they do and then they can take over the market for themselves.
* For mechanical reasons, some oil fields simply *can not* stop producing oil. When they stop pumping, then the pressure in the natural oil reservoirs might recede to a level where pumping is no longer possible with their current equipment and they might not be able to resume it later without considerable new drilling efforts.
* The fracking industry in the United States is expecting free money from the government in form of bailouts, and if they stop producing, that might disqualify them. Also, that industry is used to running a deficit for years. They are working on growing their production capacities in the long run in order to gain a dominant market position in the future when cheaper oil sources run out and they become economically viable.

> Alternatively, I would like to get paid for receiving a barrel of oil (I can keep it in my back garden) and then sell it in the future.

It might not be worth the cost of doing business for you.

* Oil barrels are heavy. Have you considered the cost for the delivery to and from your premise? I don't know the price list of your local postal service, but I am sure that package and delivery for a 300 pound barrel of hazardous material might really dig into your profit margin.
* Do you fulfill the legal requirements to store hazardous and possibly environmentally disastrous chemicals like crude oil on your premise? You didn't say where you live, but in most countries it would be illegal to do that without serious precautions to prevent an oil spill. Converting your garden shack into an up-to-code oil storage facility might get pretty expensive... if you are allowed to do that in a residential area at all.

I would expect that even in the current situation, running a crude oil storage facility is only profitable if you can benefit from economies of scale - if you are able to store a couple hundred to a couple thousand barrels of oil at a time. And if you are in a location where it actually makes economic sense to store oil (near facilities which produce or consume crude oil).


---

### Answer by username_9 on 2020-04-22. Score: 2

This negative price is caused by greedy countries.

The usual worldwide oil demand is about 100 million barrels a day. Now, because of the Corona crisis, demand is about 30 percent down, so, ideally, the world oil production should be lowered with about 30 million barrels per day. So far, however, worldwide production only got 10 percent lower.

The BIG question is, who (which country) should reduce production? The biggest producer is Saudi Arabia, and they indeed reduced production, and called upon other producers to do the same, in the OPEC meetings. They (SA) don't have that much pain, SA is filthy rich, and can afford to keep the oil underground for future production, when prices are up again.

But how about other countries? Most countries do fun things with their oil dollars, like stimulate their economies. When they reduce production, they get into an economic crisis. Also, they produce smaller amounts than SA, so they figure, yes, we agree that production should go down, but no, we keep producing the same for a little while longer to not get into a financial crisis too soon. Or, because meanwhile oil prices are already much lower because of lower demand due to Corona, they even increase production, to make up for those lower prices.

This is called Greed. You don't care about the common cause of keeping oil price up for the benefit of your OPEC friends. You don't care that oil is already a finite resource and you don't lower production to save some oil for your grandchildren. You don't care of the air getting much cleaner and getting a little bit less global warming. No, you keep pumping like crazy for just a few lousy dollars.

The rest is history. You can't go on forever pumping 20 million barrels more than demand. Storage, meaning above ground storage, is very finite, and got full. Nobody will buy your oil, even at zero price.

The obvious solution is to store surplus oil underground, where it sat at no cost for hundreds of million years.

Arguments that production could not be stopped due to pressure buildup or so are moot, as the oil prices are down for many weeks now, and there was plenty time to calmly reduce production.

You may argue that the negative price could have been prevented to reduce production just one day earlier, because indeed you cannot close the valve in five minutes. But that ignores the fact that the negative price is just a result of a downwards trend ignored for weeks. Any downward trend will eventually cross the zero. Producers should have reduced production at the first signs of lower world oil prices, weeks ago, and argued that oil is a precious resource that you can only produce and consume once in 300 million years, and should be produced only in times of high prices. Producing precious oil for (positive) low prices is just scandalous, to say the least.

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Update with a technical non-political aspect:

Today in the news, 9 hours ago:

Before the coast of California, for over a week 35 fully loaded oil tankers are waiting to be unloaded. They carry about 20 million barrels of crude oil, corresponding to about 20 percent of worldwide dayly pre-corona oil demand.

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Imagine the cost of storing oil this way. If you could empty those ships now, you could earn some serious money.

If this was about mineral water imported from Europe (Vitel, Spa), the ships could just dump to the sea. But this is oil...


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