Canadian oil trading at record low -$37.63

Canada’s oil price dropped into negative territory today, as futures traders began ditching their contracts for May delivery. The price of oil from Canada’s oilsands, known as Western Canadian Select, was trading at -$37.63 Monday morning.

No one wants to be on the hook for oil, as there isn’t anywhere to put it. Oil storage is full up across North America due to a price and production war waged by Saudi Arabia against Russia, and the steep decline in demand as a result of the coronavirus pandemic, which has slowed travel and industry drastically.

Though Saudi Arabia agreed to slow oil production to more manageable levels, the damage was already done. Oil storage facilities are so burdened that off-shore, floating oil storage is the only real option left. An oil tanker with the largest available capacity is currently going for $165,000.

Oil is sold on the futures market, meaning that contracts are bought and sold for what will be paid some months down the line. The contracts being ditched today were for May. If the price stays constant through the end of trading on Tuesday, then anyone who has a May oil contract will have to pay to unload it.

"This may prove to be one of the worst deliveries in history," said Phil Flynn, senior market analyst at Price Futures Group in Chicago. "Nobody wants or is in need of oil right now."

Whoever ends up with these contracts that have sold at negative value will have an excessive amount of oil, and nowhere to put it. That can be a very messy problem.

Western Canadian Select is typically harder to refine and transport than other providers, which means it is less costly than other options. Speaking to CBC News, Jeremy McCrea, an analyst at Raymond James, said "We did see WCS go negative this morning. As we look forward into the next month it does seem to get a little bit better but with storage so full and getting more full by the day it doesn't look too optimistic over the next couple months."

While May’s contracts are trading at a negative, June’s prices, while low, are currently trading at $22.27. The low prices are due to a supply and demand problem. Saudia Arabia increased production at exactly the moment when demand spiraled, due to the coronavirus inspired economic shut downs. The US bought as much oil as could be stored in their petroleum reserves, and oil that cannot be offloaded remains where it is.