The price of WTI crude for delivery in May on Monday fell to a negative value for the first time in history, reaching just under negative $40 per barrel at the New York Mercantile Exchange (NYMEX). The price of May futures for WTI fell by 137.71 percent, to negative $6.89 per barrel. At the same time, the price of June WTI crude oil futures fell 16.46 percent to $20.91 per barrel, and June futures for Brent crude dropped by 8.62 percent to $25.66 per barrel.
"This is a remarkable situation, extraordinary," Terzic said on Monday. "There are 1,000 producers, and some of these are small producers where the well just runs on its own and it produces, and it probably won’t be shut down because the costs are very low."
Terzic warned, however, that those producers encountering high costs will not be able to operate and will be forced to shut down.
"So, you’ve got 1,000 different producers, each has a different cost, has a different capital structure, they borrow money differently. The first ones that will go would be those that have borrowed too much money thinking the price would be high. Then, it will be those that have borrowed less."
Terzic noted the last group of oil producers likely to survive includes those companies that did not venture heavily into debt and have cash available for several months, expecting the market to recover.
When asked how many oil companies may be expected to survive, Terzic said, "I haven’t looked at the numbers, so I don’t know. They will be lucky if 50 percent survive."
"WTI is low because it is land blocked and has to go through pipelines. Secondly, storages are probably full, and thirdly, the country is in shutdown. There is just no market for oil," Terzic said. "The refineries don’t need it. I haven’t used my automobile in a week, and I used to drive every day."
Commenting on when the price may be expected to increase, Terzic said, "Number one, the economy will have to go bounce back. Number two, we will have to use first all of oil that’s in storage and only then we’ll be pumping new oil when the market will come up. So, right now, those people who have oil in storage, you have to pay for storage."
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