Oil barrel prices had started the day at $15 but have plummeted over recent hours in a move that could threaten an entire decade of growth, slashing thousands of jobs and wiping out hundreds of billions of dollars from company valuations. But the front-month US West Texas Intermediate (WTI) contract turned negative – unprecedented in history – with sellers offering buyers $37.63 a barrel. Michael Tran, managing director of global energy strategy at RBC Capital Markets, had earlier said: “There is little to prevent the physical market from the further acute downside path over the near term.
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“Refiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former.”
Prices have plummeted by more than 90 percent already this year, as the coronavirus pandemic continues to hammer the global economy.
The price of May contracts has virtually wiped out all value, breaking every record low for oil prices since 1946.
An output deal by the Organization of the Petroleum Exporting Countries (OPEC) and allied members last week to curb supply was agreed, but it appears to have done little to stop a one-third collapse in global demand.
Oil prices have plummeted to below one cent a barrel (Image: @HelenKennedy / Twitter / Getty)
Governments across dozens of countries throughout the world are extending lockdowns in a desperate attempt to slow the spread of coronavirus.
The world continues to struggle to bring the killer outbreak under control and with producers continuing to pump, a huge fire-sale has erupted among traders who don’t have access to storage.
Buyers in Texas had been offering as little as $2 a barrel for some oil streams while in New York, West Texas Intermediate dropped to $5.48 a barrel at 1:06 pm local time. Brent declined 5.8 percent to $26.44.
The huge oil price plunge has sent US stocks crashing following a strong two-week rally, with investors increasingly cautious over what is expected to be a disappointing week for earnings and economic data.
Global stock market values have been plunging over recent weeks (Image: GETTY)
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Energy stocks lost 1.9 percent in value and were on track for their sixth slide in seven sessions as the May US West Texas Intermediate (WTI) contract plummeted by more than half to its lowest price on record.
Wall Street again plummeted after oil prices fell into negative territory, with the S&P energy index plunging 2.8 percent.
Analysts warned the huge drop in oil prices highlights the decline in global growth as demand dries up.
Dan Russo, chief market strategist at Chaikin Analytics, said: “This could be a concern for investors who were expecting a V-shaped recovery on the economic front.
“Oil prices tend to be a gauge for the health of the global economy.
Prices at the petrol pumps have also been in sharp decline (Image: GETTY)
Dinald Trump is battling a huge slump in the US economy and the loss of millions of jobs (Image: GETTY)
“It’s difficult to be bullish on global economic growth with oil prices at multi-decade lows.”
David Winans, Principal, US Investment Grade Credit Research, PGIM Fixed Income, said: “Today’s price move feels like oil is passing a kidney stone. A very painful move but it can’t last for long, since producers are switching off wells as we speak.”
“The ‘supply shock’ from the OPEC+ collapse in March was really a mirage, the demand shock from COVID-19 is overwhelming everything.
“Ultimately, the path for oil prices is going to follow the path of this virus.
“Until demand shows some sign of life, oil prices will likely remain on life support.”
The death toll from the coronavirus pandemic continues to rise (Image: EXPRESS)
Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma, said: “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.”
Last Monday, oil prices surged today by almost five percent after oil producing nations agreed a historic deal that will see output reduced by nearly 10 million barrels a day.
OPEC and its allies agreed a record oil production cut following several days of talks.
The production cut begins on May 1, and will continue through until the end of June.
The deal had been struck as a move to fight plunging oil prices with the coronavirus pandemic hitting demand.