US West Texas Intermediate (WTI) crude CLc1 futures skidded by as much as 16 percent and were off 14.7 percent, or $1.88 cents, at $10.90 a barrel as of 0158 GMT. WTI plunged 25 percent on Monday. Brent crude LCOc1 futures fell to a low of $18.97 and were last down 4.1 percent, or 82 cents, at $19.17 a barrel. The benchmark slid 6.8 percent on Monday, and the contract for June delivery expires on April 30. Strategists said part of the WTI decline is due to retail investment vehicles like exchange-traded funds selling out of the front-month June contract and buying into months later in the year to avert massive losses like last week, when WTI plummeted below zero.
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“Clearly everything’s getting dragged down by the machinations in the WTI futures market,” said Daniel Hynes, senior commodity strategist at Australia and New Zealand Banking Group (ANZ) in Sydney.
The main concern is that there is nowhere to store all the oil that is not being consumed due to the drop in global economic activity amid restrictions imposed around the world to curb the spread of the new coronavirus.
Even with the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia having agreed record output cuts of nearly 10 million barrels per day (bpd) from May 1, that volume is not nearly enough to offset a drop in demand of around 30 million bpd due to COVID-19 restrictions.
“While we’re starting to see COVID-19 cases ease and some countries ease restrictions, those initial moves look fairly tentative. The market’s coming round to the view there’s going to be no quick recovery in demand,” Hynes said.
FTSE 100 LIVE: Oil prices tumbled as world’s storage tanks filled up (Image: GETTY)
7.18am update: FTSE 100 to open on front foot
London’s stock market is poised to open at almost 20 points higher.
Market analyst Michael Hewson at CMC Markets, said: “While stocks have continued to take comfort from the largesse of central banks the economic data has gone from bad to worse and unlikely to get better in the short term, which means that investors appear to be banking on a quick return to normal as governments slowly relax restrictions.
7.06am update: China stocks waver
China stocks flitted in and out of negative territory but turned positive as the start-up index gained on fresh regulatory reform, while investors awaited big banks to release their earnings after a tumultuous first quarter.
At the midday break, the Shanghai Composite index was up 0.1 percent at 2,818.48 points, after dropping 2 percent to its lowest level in more than three weeks in morning trade.
China’s blue-chip CSI300 index was up 0.8 percent, with its financial sector sub-index rising 1.2 percent, the consumer staples sector up 1.6 percent, the real estate index up 1.7 percent and the healthcare sub-index climbed 0.1 percent.
5.45am update: HSBC first-quarter profit halves on increased loan loss provisions due to coronavirus crisis
HSBC Holdings PLC’s first-quarter profit nearly halved from a year-ago, missing estimates, after boosting provisions against bad loans as the coronavirus pandemic hits borrowers worldwide.
Europe’s biggest bank by assets said profit before tax came in at $3.21 billion for January-March, down from $6.21 billion a year ago and below an average analyst forecast of $3.67 billion compiled by the bank.
The bank increased its expected credit impairment charges by a hefty $2.4 billion to $3 billion due to the impact of COVID-19 and weakening oil prices as well as “a significant charge related to a corporate exposure in Singapore”, it said.
HSBC warned the impact of the pandemic on the global economy would mean a rise in bad loans, and sustained pressure on its revenues as customer activity declined and lower central bank interest rates squeezed margins.