The price of US oil crept back above zero this morning (April 21) after turning negative for the first time in history last night.
West Texas Intermediate — the US oil benchmark — now costs $0.10 (8p) a barrel in morning trading today after hitting a historic low of -$40 (-£32) yesterday evening.
It was the first time the price of oil had slipped into negative figures as producers, desperate to sell due to a lack of storage, were paying buyers to take their oil.
Coronavirus lockdowns across the globe have limited both domestic and international travel, meaning demand for oil has fallen through the floor and producers are scrambling to find somewhere to store it.
Adrian Lowcock, head of personal investing at investment platform Willis Owen, said: “We’ve had many shocking twists and turns in this downturn, and this collapse in US oil prices into negative territory for the first time ever is another major point in the crisis.
“It shows how far-reaching the consequences are from locking down the global economy, and while this may be a short-term spell in negative territory for the oil price, it shows how the future of the global economy is very uncertain at this juncture.”
Mr Lowcock said investors could expect to see “more pain” in energy stocks in the short term while mounting concerns about energy funds themselves, which are purely exposed to oil stocks, may trigger emergency measures to avoid a “rout” in such mandates.
The price of Brent crude, the international oil benchmark, has fallen by 65 per cent over the past year and is down 1 per cent this morning.
Meanwhile WTI has seen almost 100 per cent (99.8 per cent) wiped from its price in the past 12 months.
Oil prices were hit earlier this year by an excess of supply due to the price war between Saudi Arabia and Russia.
In March Russia broke its partnership with Opec, prompting Saudi Arabia to launch an aggressive price war targeting the rival producer by ramping up production and offering big discounts.
However there were hopes of an end to the price war at the beginning of April and yesterday’s fall came despite an Opec-backed deal to cut supply by about 10 per cent.
Markets have fallen slightly this morning, with the FTSE 100 opening down 1.3 per cent and Germany’s Dax down nearly 2 per cent.
In the US, S&P 500 futures and Nasdaq futures are flat while Japan’s Nikkei closed down 2 per cent overnight.
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