US oil prices have plummeted to the lowest level in history and entered into negative territory, as demand for crude continued its decline amid the coronavirus pandemic.

A sharp sell-off gathered pace on Monday over concerns about the storage of excess oil.

The price of the West Texas Intermediate crude oil futures, whose May contract expires on Tuesday, experienced the sharpest decline by falling to minus-$40 per barrel before settling at minus-$37.63 per barrel, representing the first time in history that an oil futures contract has turned negative.

A negative price suggested people who had oil to sell were willing to pay people to take it off their hands.

The May contract for WTI entered freefall because it represented the fuel that would be delivered to the US while a majority of the country was still under stay-at-home and lockdown measures. Supply has far outstripped demand as airlines grounded their fleets, people stayed indoors and swathes of the economy shut down.

Meanwhile, US storage capacity has filled up rapidly, leaving producers struggling to find places to send their oil, further dragging down the price.

Monday’s historic collapse came despite production cuts that were announced earlier this month to offset the decline in demand for oil. Opec, the cartel of oil producing nations, finalised an agreement with other producers to cut production by 9.7 million barrels per day starting 1 May – about 10 per cent of global production.

“It hasn’t taken long for the market to recognise that the Opec+ deal will not, in its present form, be enough to balance oil markets,” wrote Stephen Innes, chief global markets strategist at AxiCorp, CNN reported.

Experts anticipated a rebound in the oil industry following this sharp drop to be slow because people were not currently “going to the pump”.

“What the energy market is telling you is that demand isn’t coming back any time soon, and there’s a supply glut,” Kevin Flanagan, head of fixed income strategy for Wisdomtree Asset Management, told Reuters. ”Ordinarily you’d be looking at oil as an inflation indicator, but then it turned into an economic-activity indicator. This price decline can be good if it means more people going to the pump, but that requires people getting out.”

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Compared to the May contract, the June contract was not experiencing the same nose dive in price, and experts said those prices were a better indicator of where the market stood.

WTI, which has a June contract expiring 19 May and was the strongest market indicator, fell 18 per cent to trade at $20.43 per barrel. Brent crude, which has entered into its June contract and was an international benchmark, has fallen 8.9 per cent at $25.83 per barrel.

The spread between the May and June contracts, coined as front month and second month, was now the widest in history, according to CNBC.