US oil prices recover a day after trading below $0 for the first time ever

Crude oil prices in the United States reached $10.01 on April 22, a day after plummeting into negative territory. According to reports, the negative surge in the US crude oil prices was due to a technical blip, however, it signals a drop in demand as nobody wants to store oil. On April 21, futures of US benchmark contract West Texas Intermediate for delivery in May reached -$37.63 a barrel, which was its lowest in history, but the prices picked up on Wednesday catapulting it to $10.01 a barrel. 

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The demand for crude oil fell drastically because of coronavirus pandemic as it has forced many countries to go into a complete lockdown and put a ban on travel as well as on the movement of people. Factories and other oil-based facilities have been shut in many of these countries where lockdown is in place to contain the spread of the virus. 

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On April 20, US President Donald Trump had said in a press conference that his administration was considering cutting oil imports from Saudi Arabia in order to save the domestic industry, which is currently facing the risk of bankruptcy. As per reports, Trump was briefed about a plan by Republican lawmakers wanting him to block oil shipments from coming into the United States through an executive order. Trump told reporters he would look into the proposal. 

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Oil price war

Crude oil prices dropped to its lowest in February this year after two of the biggest exporter Saudi Arabia and Russia failed to reach an agreement on production cuts. The collapse in the oil prices threatened the US' domestic industry following which Donald Trump urged both the parties to reach a resolution. Russia and Saudi Arabia are yet to reach an agreement on production cuts but until then both the countries will continue to flood the world market with crude oil as they can afford it. 

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(Image Credit: AP)