It’s been a historic day in the financial markets: Oil futures plunged below zero Monday for the first time as demand for energy collapsed amid the coronavirus pandemic. The plunge led to a drop in stocks, too: The Dow fell 592 points, or 2.4%, to 23,650; the S&P 500 fell 51 points, 1.7%, to 2,823; and the Nasdaq fell 89 points, 1%, to 8,560. But the market’s most dramatic action was by far in oil, where benchmark US crude for May delivery plummeted to negative $35.20 per barrel at 2:30pm Eastern, per the AP. It was nearly $60 at the start of the year. 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 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 US crude oil for June delivery, which shows a more ”normal” price, fell 14.8% 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 it’s 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.”
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