Oil Price Goes Negative as Demand Collapses, Stocks Dip

NEW YORK—Oil prices plunged below zero on Monday as demand for energy collapses amid the CCP virus pandemic and traders dont want to get stuck owning crude with nowhere to store it.

Stocks were also slipping on Wall Street in afternoon trading, with the S&P 500 down 0.9 percent, but the markets most dramatic action was by far in oil, where benchmark U.S. crude for May delivery plummeted to negative $3.70 per barrel, as of 2:15 pm. ET.

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 CCP virus 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.

Benchmark U.S. crude oil for June delivery, which shows a more “normal” price, fell 14.8 percent to $21.32 per barrel, as factories and automobiles around the world remain idled. Big oil producers have announced cutbacks in production in hopes of better balancing supplies with demand, but many analysts say its not enough.

“Basically, bears are out for blood,” analyst Naeem Aslam of Avatrade said in a report. “The steep fall in the price is because of the lack of sufficient demand and lack of storage place given the fact that the production cut has failed to address the supply glut.”

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.

Brent crude, the international standard, was down $1.78 to $26.30 per barrel.

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.

The Dow Jones Industrial Average was down 364 points, or 1.5 percent, to 23,887. The Nasdaq was down 0.1 percent..

More gains from companies that are winners in the new stay-at-home economy helped limit the markets losses Amazon rose 1.4 percent, and Netflix jumped 3.8 percent as people shut in at home buy staples and look to fill their time. Clorox likewise rose toward a new record and was up 1 percent as households and businesses that remain open look to stay clean.

In Tokyo the Nikkei 225 fell 1.1 percent after Japan reported that its exports fell nearly 12 percent in March from a year earlier as the pandemic hammered demand in its two biggest markets, the United States and China.

The Hang Seng index in Hong Kong lost 0.2 percent, and South Koreas Kospi fell 0.8 percent.

European markets were modestly higher The German DAX was up 0.5 percent, the French CAC 40 was up 0.7 percent, and the FTSE 100 in London gained 0.7 percent.

In a sign of continued caution in the market, Treasury yields remained extremely low. The yield on the 10-year Treasury slipped to 0.64 percent from 0.65 percent late Friday. It started the year near 1.90 percent. Bond yields drop when their prices rise, and investors tend to buy Treasuries when theyre worried about the economy.

Stocks have been on a generally upward swing recently, and the S&P 500 just closed out its first back-to-back weekly gain since the market began selling off in February. Promises of massive aid for the economy and markets by the Federal Reserve and URead More – Source