This is the Kato Daily Podcast for Tuesday, April 21st, 2020. I'm Kila Brown.

It's a bit of a complicated story, but there was for some time yesterday a negative price for oil.

Cato's Emma Ashford discusses what that means for various oil-producing nations and their

relationships to one another.

A series of events led us to, as of this recording, yesterday, a negative price of a barrel of oil.

What brought us here?

So, it's a really, it's a fairly complicated story that you could boil down to a really, really simple

one.

And the really simple answer is no one's driving anywhere, no one's flying anywhere. No one's cruising anywhere. A lot of factories are shut down. So there's this huge demand side shock. And so nobody's really buying oil. And then you add into that some of the other stuff that's been going on as sort of a price war between the Saudis and the Russians.

You add in some technical glitches, that is to say that the reason the oil prices actually went negative yesterday is mostly because market traders suddenly realized that they were about to have to actually take possession of this oil and they don't have any storage available, which is why they were trying to pay people to take it off their hands.

So, you know, it's at heart, it's a very simple story about demand not enough demand

too much supply but it gets just a little technical when you're talking about

why it actually went negative. The world is basically I don't want to say drowning in oil at the moment, but we were in a situation a month, couple of months ago where we had a real supply glut, right?

So the Saudis and the Russians had this OPEC plus deal that basically broke down and so they both decided to pump as much as they could to try and win the price for.

And so we were already in a position of oversupply. try and win the price for.

And so we were already in a position of oversupply.

All this extra oil got dumped onto the market.

Nobody's buying any oil.

And we're literally in a situation

where the storage facilities for oil all around the world are

filling up every tank or ship that's available, every storage area that's available, every barrel

that's available is being used to store oil and it's not all getting used like it usually does.

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