NOEL KING, HOST:
Yesterday, U.S. oil prices did something wild - they went negative. That means traders were actually paying people to take oil contracts off of their hands. Camila Domonoske covers energy for NPR's Business Desk, and she has been watching this unfold. Good morning.
CAMILA DOMONOSKE, BYLINE: Good morning, Noel.
KING: All right, so how unusual is this?
DOMONOSKE: I'm running out of synonyms for unprecedented.
DOMONOSKE: The system, the exchange where this trading happens, it had to be changed to allow negative numbers. It had never done this before. I spoke to Leah McGrath Goodman. She's the author of "The Asylum: The Renegades Who Hijacked The World's Oil Market," and she put it like this.
LEAH MCGRATH GOODMAN: This negative chart, you know, you can print it out and frame it and show it to your children.
DOMONOSKE: Yeah. This was bonkers.
KING: Bonkers. Unprecedented. Why did it happen?
DOMONOSKE: So have you ever tried to sell something on Craigslist and it's, you know, a nice sofa, but you're moving out tomorrow and it has to go? You're going to take a much lower price than you want, and you might even have to pay someone to haul it away. And that's pretty much what happened to West Texas Intermediate crude futures.
So investors holding contracts for oil to be delivered in the future - in this case, in May - they have a deadline. They had to sell by today or else they actually get that oil showing up on their doorstep. And if you bought that futures contract as an investment - you were always planning to sell it to someone else - you don't really want the oil yourself, so you have to find someone who does want the oil to buy it from you. Normally, not a problem. Lots of people want oil. But during this pandemic, it suddenly has become an issue.
I talked to Bob Iaccino. He's a co-founder of Path Trading Partners. And I asked him what the market looked like yesterday. He said this.
BOB IACCINO: If somebody were to say to a refiner here, just take my oil free, then they would say, well, where am I going to put it? That space doesn't exist.
DOMONOSKE: The tanks are already full because of the coronavirus pandemic. Everyone is driving less. Planes are flying less. They have fewer people. There's less oil being used by manufacturing. Across the board, our consumption of oil is down. But oil is still getting pumped out of the ground. So it's building up in these huge stockpiles that mean there's not as much space available to store crude as people are looking for. So if you don't have buyers at zero dollars, you have to go even lower.
KING: Why would producers still be taking it out of the ground if they know it's basically not worth anything and it's just going to sit there?
DOMONOSKE: Well, it costs money for a producer to shut a well down. And once you've shut a well down, sometimes it can be hard to get it back up. So companies don't want to do it right away, even if they're going to be taking a loss or maybe even paying money for a little while. Eventually, these low prices will push everyone to cut production. Internationally, the OPEC Plus group, OPEC and its allies, they've reached a deal to cut production. It's an about-face from recent events, where they were doing the opposite. But all these changes just aren't going to happen fast enough to bring the market back to what it used to look like.
And I should note here that these negative prices - other crude prices aren't negative like West Texas', but they are down across the board. Oil prices are low, and they're dropping lower.
KING: Well, could the federal government intervene and stabilize the market in some way?
DOMONOSKE: Yeah, maybe. So last night, President Trump mentioned a few different possible actions. Some of these have come up before. He talked previously about filling up the Strategic Petroleum Reserve, which means buying oil to put it in storage that didn't get funded last time. They could lease out space - block Saudi shipments of oil, which once would have been unheard of. Some really unprecedented policy changes are being discussed. But I should note the oil industry is divided on what interventions they would want from the government.
KING: OK. NPR's Camila Domonoske. Thanks so much.
DOMONOSKE: Yeah, thank you. Transcript provided by NPR, Copyright NPR.