Usually, the market for oil is like any other market: it's all about supply and demand. But the oil market today is different. Thanks to coronavirus, the global economy has stalled, and no-one's using oil products to drive or fly or make chemicals and plastics. But producers are still pumping, because it's not easy to just shut down oil production facilities. So what used to be a supply and demand equation has become a supply and storage equation, and there simply isn't enough storage capacity out there.
So what's a producer to do? Companies pumping West Texas Intermediate crude found yesterday that because there is zero demand and close to zero storage capacity, they've had to pay buyers to take the oil off their hands. It's one of the most bizarre upsets the business has ever seen and it could have enormous implications for the global market in oil, as well as for the global economy.
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