Oil prices plunged below zero on Monday for the first time in history, with the US benchmark West Texas Intermediate (WTI) closing at -$37.63 a barrel.
The unprecedented price plunge comes as demand for energy collapses amid coronavirus-induced lockdowns and traders don’t want to get stuck owning crude with nowhere to store it.
Much of the drop into negative territory was chalked up to technical reasons — the May delivery contract is close to expiring so it was seeing less trading volume, which can exacerbate swings. But prices for deliveries even further into the future, which were seeing larger trading volumes, also plunged. Demand for oil has collapsed so much due to the coronavirus pandemic that facilities for storing crude are nearly full.
Tanks could hit their limits within three weeks, according to Chris Midgley, head of analytics at S&P Global Platts.
Stocks were also slipping on Wall Street in afternoon trading.
Halliburton swung between gains and sharp losses, even though it reported stronger results for the first three months of 2020 than analysts expected. The oilfield engineering company said that the pandemic has created so much turmoil in the industry that it “cannot reasonably estimate” how long the hit will last. It expects a further decline in revenue and profitability for the rest of 2020, particularly in North America.
In the stock market, the mild drops ate into some of the big gains made since late March, driven lately by investors looking ahead to parts of the economy possibly reopening as infections level off in hard-hit areas. Pessimists have called the rally overdone, pointing to the severe economic pain sweeping the world and continued uncertainty about how long it will last.
"Oil down is normally good for the rest of the sectors, but you can make the argument that it is so low that it's not good for anybody in terms of what it's going to do to unemployment and economic growth," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.
The Dow Jones Industrial Average and Nasdaq were both down, as were Asian markets the Nikkei in Tokyo, the Hang Seng index in Hong Kong and South Korea’s Kospi.
(FRANCE 24 with REUTERS and AFP)