Mad Times: Not Long Ago Oil Prices Were Negative, Now US$100
The global energy market has witnessed a moment that was almost inconceivable. On 20 April 2020, a month after COVID-19 was declared a global pandemic, the price of the US benchmark crude oil, West Texas Intermediate (WTI), fell into negative territory to around -US$37 per barrel. However, just a few years later, prices reversed direction, surging to approach and even breach US$100 per barrel amid the latest geopolitical conflicts.
The issue arose on the logistics side, with storage tanks full. In this condition, producers had to dig deeper into their pockets to have their oil taken away, as storage costs exceeded the value of the commodity itself. This is what caused the May 2020 WTI futures contract for delivery to fall to a negative price.
This collapse occurred amid the collapse of global demand due to the COVID-19 pandemic. Economic activity halted, travel was restricted, and energy consumption dropped sharply in a short time.
Brent prices were also pressured, falling to just US$9.12 per barrel in April 2020, far from the US$70 range at the start of the year. At that time, the market faced a massive oversupply. Production continued while consumption fell. Storage tanks were full. Producers had no space to store additional oil.
Futures Contract Mechanism Accelerates Pressure
Contracts nearing expiry required holders to accept physical delivery. In conditions of full storage, market participants offloaded those contracts at any price to avoid the logistics burden.
The volume of the May contract that year was relatively small compared to subsequent months, making the selling pressure sharper. Prices moved into negative territory because producers chose to pay others to take the oil.
Another factor came from the production conflict between Saudi Arabia and Russia in March 2020. The failure to reach a production agreement triggered a supply surge amid collapsing demand.
This situation continued until the Organization of the Petroleum Exporting Countries and its partners agreed to a production cut of 9.7 million barrels per day starting in May 2020. This cut was the largest in history, yet prices remained pressured throughout the first half of the year.
Entering mid-2020, the movement began to change. Easing of activity restrictions boosted consumption. Brent rose to an average of US$40 per barrel in June. By the end of the year, WTI prices were around US$48 per barrel and Brent around US$51 per barrel. According to Matthew Johnston, optimism about vaccine distribution also strengthened that recovery.
The Complete Opposite in 2026: Supply Disrupted, Prices Explode
Six years later, the market direction reversed. According to the IEA as of 12 March 2026, supply disruptions became the main factor. Conflicts in the Middle East hampered oil flows through the Strait of Hormuz, which previously carried around 20 million barrels per day. Oil flows dropped drastically, while alternative route capacities were limited. Gulf countries cut production by more than 10 million barrels per day.
The IEA noted that global supply fell by around 8 million barrels per day in March 2026. These disruptions were followed by the shutdown of more than 3 million barrels per day of refinery capacity in the region due to attacks and export barriers. IEA member countries responded by releasing 400 million barrels from emergency reserves to maintain market supply.
Prices moved quickly in response to these changes. Brent briefly approached US$120 per barrel before falling to around US$92, up about US$20 in one month. On the demand side, disruptions in flights and LPG distribution held back consumption by around 1 million barrels per day in the short term. However, supply-side pressure remained dominant.
The year 2020 was filled with oversupply and sharply falling demand. The year 2026 was marked by distribution disruptions and production declines. Price movements followed that direction without long delays.
This extreme change demonstrates the character of oil as a commodity sensitive to global disruptions. When consumption stops, prices can fall to have no value. When distribution is disrupted, prices rise quickly in a short time.