Stocks on Wall Street fell sharply amid historic fall in oil prices
Brent crude, the international benchmark, also slumped, but that contract was nowhere near as weak because more storage is available worldwide.
Traders fled from the expiring May U.S. oil futures contract in a frenzy on Monday with no place to put the crude, but the June WTI contract settled at a much higher level of $20.43 a barrel. “It’s like trying to explain something that is unprecedented and seemingly unreal,” said Louise Dickson, oil markets analyst at Rystad Energy. “Pricey shut-ins or even bankruptcies could now be cheaper for some operators, instead of paying tens of dollars to get rid of what they produce.”
Investors bailed out of the May contract ahead of expiry later on Monday because of lack of demand for the actual oil. When a futures contract expires, traders must decide whether to take delivery of the oil or roll their positions into another futures contract for a later month. Prices have been pressured for weeks with the coronavirus outbreak hammering demand while Saudi Arabia and Russia fought a price war and pumped more. The two sides agreed more than a week ago to cut supply by 9.7 million barrels per day , but that will not quickly reduce the global glut.
FILE PHOTO: An oil pump jack pumps oil in a field near Calgary, Alberta, Canada on July 21, 2014. REUTERS/Todd KorolWeak global economic data also pressured prices. The German economy is in severe recession and recovery is unlikely to be quick as coronavirus-related restrictions could stay in place for an extended period, the Bundesbank said.
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