Global oil prices hit 21-year low but stock markets edge higher
New York/Hong Kong/London (CNN Business) — Oil prices continued their epic crash on Wednesday as Brent crude futures, the main benchmark for global contracts, plunged by as much as 17% to their lowest level since 1999.
The collapse follows a historic rout on Monday when US oil for May delivery traded at negative prices as the combination of evaporating demand due to the pandemic, oversupply and a critical lack of storage for excess barrels saw traders effectively paying people to take American crude off their hands.
US oil futures for June also plunged Wednesday, and were last down 5.7% to $10.91 a barrel, reversing a rise during early Asian trading hours. The price of a barrel of West Texas Intermediate crude had settled Tuesday at $11.57, after falling as low as $6.50.
Brent crashed as low as $15.98 a barrel, before steadying to trade around $17.30, still down more than 10%.
The market is worried about oil hubs running out of room to store barrels that nobody wants as the coronavirus pandemic causes demand for crude to disappear. While Saudi Arabia and Russia recently reached a deal with other members of the OPEC+ alliance to cut supply from May 1 by a record amount, that has done little to alleviate fears.
“Oil futures prices should turn around once demand picks up for the physical product but that looks a couple of months away,” wrote Jasper Lawler, head of research at London Capital Group.
Several members of the OPEC+ alliance discussed the price crash on a conference call on Tuesday, although key members including Saudi Arabia and Russia did not take part, according to Reuters.
“Panic is spreading not only among oil traders but also within OPEC+, prompting it to conduct an emergency conference call yesterday, though no new strategic consensus has been reached as yet,” wrote Eugen Weinberg, head of commodities research at Commerzbank, in a note to clients on Wednesday.
The oil panic hung over markets in Asia. Japan’s Nikkei (N225) and South Korea’s Kospi (KOSPI) slumped 0.7% and 0.9%, respectively, on Wednesday.
Hong Kong’s Hang Seng Index (HSI) and China’s Shanghai Composite (SHCOMP) started the day lower, but closed up 0.4% and 0.6%.
European markets opened higher, with Germany’s DAX (DAX) gaining 1.6%, as did the FTSE 100 (UKX) in London. France’s CAC 40 (CAC40) rose 1.1%.
Taking a cue from Europe, US stock futures posted gains. Dow (INDU) futures were last up 1.3%. S&P 500 (SPX) futures and Nasdaq (COMP) futures were both 1.4% higher.
On Wall Street, Chipotle (CMG) and Netflix (NFLX) reported first-quarter earnings after the bell on Tuesday. Netflix saw massive subscriber growth, beating its own expectations, with a whopping 16 million subscribers added.
Subscriber gains were propelled in part by coronavirus stay-at-home orders and popular Netflix releases such as reality dating show “Love is Blind” and docu-series “Tiger King.”