US oil prices have turned negative for the first time ever forcing producers to pay buyers to take stocks off their hands.
Crude is pumped out of the ground at a rate of around 100 million barrels a day to feed a pre-coronavirus demand of 90 million barrels a day – but the outbreak has seen demand plunge as gas-guzzling aircraft are grounded, factories close and cars remain parked and unused across the world.
A barrel of West Texas crude selling at around $40 before the coronavirus lockdown started is now worth -$40.
Oil storage facilities and tankers chartered to store the excess are almost full.
Brent crude prices tumbled as well to $18.97 a barrel – a 25.81% drop in a day.
Carnage blamed on speculators
Analysts blamed the oil price carnage on speculators who bought futures contracts to deliver oil in May at pre-coronavirus prices but were forced to sell low because of the global economic slump.
“The price action is best understood as a quirk or peculiarity of futures trading,” said analyst James Trafford of Fidelity International.
“But it isn’t cataclysmic. We don’t see negative oil prices as a new normal, going forward.”
Markets around the world lost ground on the news, with London’s FTSE 100 closing 2.96% down at 5641.03 and the FTSE 250 posting a similar fall of 2.86% to 15399.25.
Besides oil companies like Shell and BP taking a hit in the market, the gloom spread to other sectors, including mining and banking.
Markets spiral into the red
The Pound suffered as well, losing 1.19% against the Euro, sliding to €1.113 and 1.31% against the US dollar to $1.22.
Across the Atlantic, the Dow Jones in New York was trading 2.18 down at 23133.93 mid-afternoon.
The NASDAQ was 3.02% down at 8302.44, while the S&P 500 lost 2.63% at 2749.05.
Markets in Europe were also in the red. In Paris, the CAC40 closed 3.77% down at 4357.46, the Frankfurt DAX saw a 3.99% fall to 10249.85, the Euro Stoxx decreased 4.06% to 2791.343 and the Madrid IBEX fell back 2.88% to 6634.90.
Gold lost 0.95% with the spot price falling to $1675.41 an ounce.