Energy
How Oil Prices Went Subzero: Explaining the COVID-19 Oil Crash
Explaining the Historic COVID-19 Oil Price Crash
The Great Lockdown continues to turn markets on their head.
Last week, we dug into the unprecedented number of initial jobless claims coming out of the United States, which topped 22 million in a period of four weeks.
It’s just days later, and we already have our next market abnormality: this time, traders were baffled by West Texas Intermediate (WTI) crude โ the U.S. benchmark oil price โ which somehow flipped negative for the first time in history.
How is that possible? And how does it tie into the COVID-19 oil price crash in general?
Setting the Geopolitical Stage
Oil is a geopolitical game, and big price swings always come with a geopolitical undercurrent.
This particular story picked up steam in February as OPEC+ producers tried to negotiate a production cut, amid concerns that COVID-19 could impact demand. Russia walked out on these meetings, and Saudi Arabia responded by undercutting oil prices by $6-8 per barrel.
The world went into lockdown, energy demand dissipated, and oil producers continued to pump at will. Then on April 9th, nearly a full month after COVID-19 was declared a pandemic, Russia and Saudi Arabia finally settled their differences.
However, this truce came too late โ prices had already fell about 60% from February highs.
How Prices Went Subzero
Up until recently, this was a fairly run-of-the-mill oil price crash โ but then prices suddenly sunk below zero, with May futures for WTI oil closing at -$37.63 on April 20th.
For the first time in history, producers were willing to pay traders to take oil off their hands. This oddity is partially a function of the particularities of futures contracts:
- Buyers Wanted (At Any Cost!)
Futures contracts normally rollover to the next month without much happening, but in this case traders saw the May contract as a “hot potato”. No one wanted to be stuck taking delivery of oil when the world is awash in it and the country is in lockdown. - A Time and a Place
Oil futures contracts specify a time and place for delivery. For WTI oil, that specific place is Cushing, Oklahoma. With most storage capacity booked already, taking physical delivery wasn’t even an option for many players.
In other words, sellers outnumbered buyers by a crazy margin โ and because oil is a physical commodity, someone has to ultimately take the contract.
At time of publishing, the May contract and spot prices have “rebounded” to about $10. The June contract is slightly higher, at $13.
“Never before has the oil industry come this close to testing its logistics capacity to the limit.”
– International Energy Agency (IEA), Oil Market Report for April
Overcoming the Supply Glut
What do you do when oil is practically free?
You store as much of it as you can, and hope that at some point you can sell it for more.
Unfortunately, everyone has the exact same idea, and as a result there is a historic glut that is filling up the world’s storage capacity both on land and at sea:
- In March, it was estimated that 76% of the worldโs available oil storage capacity was already full.
- A record-setting 160 million barrels of oil is being stored on tankers at sea, according to Reuters.
- The cost of renting an oil supertanker has gone through the roof. It’s jumped from $20,000 per day to $200,000-$300,000 per day, according to Rystad Energy.
It remains to be seen how fast the transportation industry will recover in a post-COVID-19 world, but for now the outlook for all oil producers is grim. The continued fallout will not only affect industry, but also the countries that rely on oil exports to balance their budgets.
Energy
Visualizing the Scale of Global Fossil Fuel Production
How much oil, coal, and natural gas do we extract each year? See the scale of annual fossil fuel production in perspective.

The Scale of Global Fossil Fuel Production
This was originally posted on Elements. Sign up to the free mailing list to get beautiful visualizations on natural resource megatrends in your email every week.
Fossil fuels have been our predominant source of energy for over a century, and the world still extracts and consumes a colossal amount of coal, oil, and gas every year.
This infographic visualizes the volume of global fossil fuel production in 2021 using data from BPโs Statistical Review of World Energy.
The Facts on Fossil Fuels
In 2021, the world produced around 8 billion tonnes of coal, 4 billion tonnes of oil, and over 4 trillion cubic meters of natural gas.
Most of the coal is used to generate electricity for our homes and offices and has a key role in steel production. Similarly, natural gas is a large source of electricity and heat for industries and buildings. Oil is primarily used by the transportation sector, in addition to petrochemical manufacturing, heating, and other end uses.
Hereโs a full breakdown of coal, oil, and gas production by country in 2021.
Coal Production
If all the coal produced in 2021 were arranged in a cube, it would measure 2,141 meters (2.1km) on each sideโmore than 2.5 times the height of the worldโs tallest building.
China produced 50% or more than four billion tonnes of the worldโs coal in 2021. Itโs also the largest consumer of coal, accounting for 54% of coal consumption in 2021.
Rank | Country | 2021 Coal Production (million tonnes) | % of Total |
---|---|---|---|
#1 | ๐จ๐ณ China | 4,126.0 | 50% |
#2 | ๐ฎ๐ณ India | 811.3 | 10% |
#3 | ๐ฎ๐ฉ Indonesia | 614.0 | 8% |
#4 | ๐บ๐ธ U.S. | 524.4 | 6% |
#5 | ๐ฆ๐บ Australia | 478.6 | 6% |
#6 | ๐ท๐บ Russia | 433.7 | 5% |
#7 | ๐ฟ๐ฆ South Africa | 234.5 | 3% |
#8 | ๐ฉ๐ช Germany | 126.0 | 2% |
#9 | ๐ฐ๐ฟ Kazakhstan | 115.7 | 1% |
#10 | ๐ต๐ฑ Poland | 107.6 | 1% |
๐ Other | 600.9 | 7% | |
Total | 8,172.6 | 100% |
India is both the second largest producer and consumer of coal. Meanwhile, Indonesia is the worldโs largest coal exporter, followed by Australia.
In the West, U.S. coal production was down 47% as compared to 2011 levels, and the descent is likely to continue with the clean energy transition.
Oil Production
In 2021, the United States, Russia, and Saudi Arabia were the three largest crude oil producers, respectively.
Rank | Country | 2021 Oil Production (million tonnes) | % of Total |
---|---|---|---|
#1 | ๐บ๐ธ U.S. | 711.1 | 17% |
#2 | ๐ท๐บ Russia | 536.4 | 13% |
#3 | ๐ธ๐ฆ Saudi Arabia | 515.0 | 12% |
#4 | ๐จ๐ฆ Canada | 267.1 | 6% |
#5 | ๐ฎ๐ถ Iraq | 200.8 | 5% |
#6 | ๐จ๐ณ China | 198.9 | 5% |
#7 | ๐ฎ๐ท Iran | 167.7 | 4% |
#8 | ๐ฆ๐ช UAE | 164.4 | 4% |
#9 | ๐ง๐ท Brazil | 156.8 | 4% |
#10 | ๐ฐ๐ผ Kuwait | 131.1 | 3% |
๐ Other | 1172.0 | 28% | |
Total | 4221.4 | 100% |
OPEC countries, including Saudi Arabia, made up the largest share of production at 35% or 1.5 billion tonnes of oil.
U.S. oil production has seen significant growth since 2010. In 2021, the U.S. extracted 711 million tonnes of oil, more than double the 333 million tonnes produced in 2010.
Natural Gas Production
The world produced 4,036 billion cubic meters of natural gas in 2021. The above graphic converts that into an equivalent of seven billion cubic meters of liquefied natural gas (LNG) to visualize it on the same scale as oil and gas.
Here are the top 10 producers of natural gas in 2021:
Rank | Country | 2021 Natural Gas Production (billion m3) | % of Total |
---|---|---|---|
#1 | ๐บ๐ธ U.S. | 934.2 | 23% |
#2 | ๐ท๐บ Russia | 701.7 | 17% |
#3 | ๐ฎ๐ท Iran | 256.7 | 6% |
#4 | ๐จ๐ณ China | 209.2 | 5% |
#5 | ๐ถ๐ฆ Qatar | 177.0 | 4% |
#6 | ๐จ๐ฆ Canada | 172.3 | 4% |
#7 | ๐ฆ๐บ Australia | 147.2 | 4% |
#8 | ๐ธ๐ฆ Saudi Arabia | 117.3 | 3% |
#9 | ๐ณ๐ด Norway | 114.3 | 3% |
#10 | ๐ฉ๐ฟ Algeria | 100.8 | 2% |
๐ Other | 1106.3 | 27% | |
Total | 4,036.9 | 100% |
The U.S. was the largest producer, with Texas and Pennsylvania accounting for 47% of its gas production. The U.S. electric power and industrial sectors account for around one-third of domestic natural gas consumption.
Russia, the next-largest producer, was the biggest exporter of gas in 2021. It exported an estimated 210 billion cubic meters of natural gas via pipelines to Europe and China. Around 80% of Russian natural gas comes from operations in the Arctic region.
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