Coronavirus pandemic | What next for oil after the big crash

Oil prices crashed and landed on the liability side of the balance sheet after storage concerns, coupled with falling demand and virtually no economic activity, pushed the asset class to sub-zero levels.

The ever-widening contango triggered by the coronavirus pandemic pushed the futures contract for West Texas Intermediate (WTI) to -$37.63 a barrel, a one-day drop of $55.90, or 306 percent.

The debacle highlighted how oversupplied the US oil market has become even after Russia, OPEC agreed to a historic output cut of 9.7 million barrels a day.

Also read: The anomaly of oil: How sellers ended up paying for the commodity

Experts warn that the short-sellers' ire may spill into June WTI contract, which settled at $20.43 per barrel on April 21. They expect another dire month for the crude oil markets if demand does not improve and the virus continues to batter global economies.

"People are concerned that we are going to see so much build-up of inventory that it’s going to be very difficult to fix in the near term and there is going to be a lot distressed cargoes on the market. People are trying to get rid of the oil and there are no buyers," Michael Lynch, president of Strategic Energy & Economic Research Inc told the New York Times.

On the other hand, the opening up of China, for where the outbreak began, may bode well for the so-called prized commodity.

Also read: What does the fall in oil prices mean for Indian equities

China, which accounted for more than 80 percent of global oil demand growth last year, is slowly trying to reinstate the economy after the highly contagious virus was “contained” in the world's second-largest economy.

The China model also gives investors hopes that humanity will ultimately outlast the virus and life would return to normal in the longer run, signs of which are already visible as the virus appears to have peaked in the worst-hit areas of Europe and the US.