It may be unprecedented for oil producers to pay commodity traders to take crude off their hands, but the supply and demand dynamics which forced West Texas Intermediate (WTI) prices into negative territory are standard fayre. Events from history can therefore teach us a lot about what we might expect next from oil prices. Though it should be emphasised that the events that gave rise to the current market dynamics are most certainly unique.
Oil and the global economy
Demand for crude oil and other hydrocarbon-based fuels is cyclical with peak supply usually reserved for the cold winter months when demand is high. The supply level helps to determine the crude oil inventories, which along with anticipated demand, provide the central levers for the price mechanism.