Oil crash slams stocks Monday's plunge in oil, which saw some prices reach minus $40 a barrel, resulted from growing crude stockpiles and dwindling storage space as lockdowns to contain the spread of the novel coronavirus slashed global fuel use. First-month West Texas Intermediate continued to trade in negative territory on Tuesday, at -$7.1 3 a barrel.
"I have always thought of oil a little bit like a currency; it stores value, is controlled by world leaders and makes the world go round," said Gregory Perdon, Co-Chief Investment Officer at Arbuthnot Latham.
"But yesterday was a wake-up call and investors would be remiss to ignore that low oil means lower inflation, higher defaults, lower growth and more political instability as less petrodollars circulate in the system."
AWASH IN OIL
Monday's plunge in U.S. crude came as the May contract expiry looms at the end of Tuesday's trade.
International benchmark Brent crude, more readily seaborne than its U.S. counterpart, fell 15.7% to $21.69 per barrel.
That is still some 60% below January's peak, highlighting the disruption to energy consumption and the long road back to global growth that underpins oil demand.
"This level of oil price is not sustainable for any global oil producer. Even for Saudi Arabia, which has a low cost of production, this is not viable," said Jai Malhi, global market strategist at J.P. Morgan Asset Management.
"Such low prices will not last and the pressure on stor age will likely force OPEC+ into further production cuts in order to boost prices."
The yield on benchmark 10-year U.S. Treasuries, which falls when prices rise, dropped under 0.6% to 0.5769%..
Spot gold prices traded 1.5% lower at $1,667.36 per ounce.