Betty Liu Explains: Why Oil Prices Went Negative
Why did oil prices go negative last week?
That was really quite a day on Monday. So, you saw WTI crude go into negative price territory. As you can imagine, the demand for oil has dropped dramatically. We're not driving as many cars. We're not flying as many airplanes. And so, that decline in demand means that oil is piling up in storage. That price drop also was likely exacerbated by an expiring futures contract and it basically capped off three straight weeks of losses in oil.
What is the difference between WTI and Brent crude?
That is a common question. Those are the two most popularly traded grades of oil. Brent stands for Brent North Sea Crude and WTI stands for West Texas Intermediate. And it basically just tells you where that oil is coming from. So, the Brent is produced in the North Sea and it serves as the oil benchmark for Middle East, Africa and European oil. WTI is the oil benchmark for North American crude. Now, there's been commentary around the fact that Brent seems to be less susceptible to some of these storage issues you've been hearing about. It's a waterborne contract, whereas WTI is landlocked. So, there's a finite amount of storage and it's much more difficult to get that oil in and out of the region.