Oil prices plunged into negative territory on Monday as the coronavirus pandemic keeps people at home and destroys demand for fuel. The price of US benchmark crude oil for delivery in May fell below zero as storage capacity reached its limit. (April 20)
BANGKOK – Global stock prices skid Tuesday after US crude oil prices plunged below zero as demand plummets as the pandemic leaves factories, cars and planes idle.
The German DAX lost 2.2% to 10,443.42 at the start of the session and the CAC 40 in France lost 2.4% to 4,420.53. The British FTSE 100 fell 1.5% to 5,724.68.
Wall Street seemed ready to take losses, the future contract for the S&P 500 falling by 0.6%, while the contract for the industrialists of the Dow lost 1%.
As stock prices gradually stabilized after wild swings earlier this year, investors were worried about the growing number of coronavirus cases in Japan and some countries in Southeast Asia.
Unconfirmed reports on Tuesday reported that North Korean leader Kim Jong Un was in a fragile state after aggravated surgery. But the South Korean government has said that Kim appears to be handling state affairs as usual.
More: Oil prices plunge below zero, stocks close lower
Overlooking the markets, the price of oil plunged as an increasing glut pushes storage capacity to its limits. As of Tuesday morning, the cost of delivering a barrel of US crude in May was 2.58 barrels.
It was still an improvement over the US benchmark regulation at $ 37.63 a barrel on Monday. Traders are still paying around $ 20 a barrel for US oil to be delivered in June. Analysts believe this is close to the “real” price of oil.
The tumult in the oil market reflects volatility in many others and reflects uncertainty about the direction of the world economy as governments begin to loosen controls imposed to contain the coronavirus.
“We could just be in the eye of the hurricane as the epicenters of its rage remain focused on the devastation of demand and excess supply of crude oil,” Stephen Innes of AxiCorp. said in a comment.
“At a minimum, oil prices will be the last asset class to recover from a deadlock,” and only when travel restrictions are lifted, he said.
When the negotiation of contracts for US oil to be delivered in May expires on Tuesday, the first available delivery will be for June.
On Tuesday, it was down 28 cents to $ 20.15 a barrel in ecommerce on the New York Mercantile Exchange.
Brent crude oil, the international standard, fell from $ 2.91 to $ 22.66. It fell nearly 9% on Monday to $ 25.57 a barrel.
“The historic drop in WTI prices is an indication of the downward pressure that many other grades of crude oil may face, given the oversupply situation,” said Sushant Gupta of Wood Mackenzie in a report.
On the positive side, given the very low prices at the moment, “this also offers an opportunity for large Asian consuming countries like China and India to speed up the filling of their oil reserves.”
Gupta said India, for example, still has up to 13 million barrels of spare capacity out of a total of 39 million barrels of storage capacity.
In equity trading, the Tokyo Nikkei 225 fell 2% on Tuesday to 19,280.78 while the Hong Kong Hang Seng index lost 2.2% to 23,793.55. South Korea’s Kospi lost 1% to 1,879.38.
The Australian S & P / ASX 200 fell 2.5% to 5,221.30 and the Shanghai Composite Index lost 0.9% to 2,827.01.
As a sign of continued caution in the market, yields on Treasury bills remained extremely low. The 10-year Treasury yield slipped to 0.61% against 0.62% on Monday evening.
In currency trading, the dollar rose to 107.80 Japanese yen against 107.63 on Monday. The euro fell to $ 1.0825 from $ 1.0862.
Stocks have recently seen a general upward trend, supported by promises of massive economic and market aid by the Federal Reserve and the US government.
More recently, countries around the world have temporarily eased business closure restrictions to slow the spread of the virus, which has killed more than 170,000 people and infected more than 2.4 million people.
Health experts warn that the pandemic is far from over and that new gusts could ignite if governments allow a premature rush to “normal” life. Many analysts also say that part of the recent rally in stocks is based on expectations that are too optimistic for a rapid economic rebound after the closings are over.
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