Analysts said the US oil futures price turning negative reflects an energy market continuing to reel from the dual demand-supply shock amid the COVID-19 pandemic, and China should further increase domestic oil and gas storage facility construction for better energy security.

The May contract for US oil benchmark has turned negative for the first time in history, as the coronavirus pandemic decreased demand for fuel amid insufficient storage for the massive glut of oil.

West Texas Intermediate for May delivery shed $55.9 to settle at-$37.63 a barrel on the New York Mercantile Exchange on Monday, a decline of nearly 306 percent.

It is the first time an oil futures contract has traded negative in history, which means producers would be paying buyers to take oil off their hands.

The international benchmark Brent crude futures contract for June was down 15 percent during early morning trading on Tuesday, a record low since April 2002, while WTI crude futures for June delivery dropped more than 7 percent during morning trading on Tuesday, falling below $19 a barrel.

A negative oil price illustrates that the cost to transport the crude to refineries and storage exceeds that of crude itself. And according to Richard Chatterton, head of oil demand analysis of research firm Bloomberg-NEF, the spot value of physical oil is zero if supply outstrips demand and there is nowhere left to store it.

Li Li, research director at energy consulting company ICIS, said: "The recently reached crude output reduction of 9.7 million barrels per day for May-June by OPEC and other crude producers led by Russia has definitely played its role, but the reduction is still far from enough considering the economic damage caused by the coronavirus pandemic and gloomy prospects for a rebound," she said.

"The excess production capacity in the oil sector for the following two months is still very severe."

According to Luo Zuoxian, head of the intelligence research department of the Sinopec Economics and Development Research Institute, the reason for crude futures going into negative territory is the coronavirus pandemic depressing demand for fuel and not enough storage for the crude.

The whole industry chain is affected, he said.

While it's a good opportunity to buy in crude for China, the biggest crude importer worldwide, the country might not see massive purchases because of the limited storage capacity in the country, he said.

He suggested China should further increase its oil and gas storage facility construction to improve its energy security.

Chatterton from BloombergNEF said, "It's not the new normal but it probably won't be the last time we see a negative price.

"As long as the lockdowns persist we will be in this holding pattern, with the market trading around the question of whether or not storage will fill up to capacity and whether shut ins can take enough supply out of the market quick enough."

Crude oil futures closed lower on Tuesday in daytime trading on the Shanghai International Energy Exchange. The most active crude oil contract for June delivery was down 11.5 yuan ($1.63) to close at 229.2 yuan a barrel.

The benchmark Shanghai Composite Index of the mainland stock market dropped by 0.9 percent to close at 2,827.01 on Tuesday.