World share prices skidded Tuesday after the price of U.S. crude oil plunged below zero, with demand collapsing as the coronvirus pandemic leaves factories, automobiles and airplanes idled.
The extreme volatility in energy markets highlighted investors’ broad concerns about the duration of the pandemic and its impact on the economy, weighing on financial markets more broadly.
In Europe, Germany’s DAX stock index lost 2.4 per cent to 10,420 and the CAC 40 in France shed 2.2 per cent to 4,428. Britain’s FTSE 100 declined 1.7 per cent to 5,714.
Wall Street looked set for losses, with the future contract for the S&P 500 down 1.3 per cent, while the contract for the Dow industrials lost 1.7 per cent.
A growing glut of oil is pushing storage capacity to its limits, leading to unprecedented drops in crude markets.
The U.S. benchmark’s settled at negative $37.63 per barrel on Monday and on Tuesday, the cost to have a barrel of U.S. crude delivered in May was at negative $7.40 per barrel.
When trading of contracts for U.S. oil to be delivered in May expire on Tuesday, the earliest delivery available will be for June. Analysts consider the June contract to now be closer to the “true” price of crude.
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But even the June contract was falling sharply. It was down $3.85 at $16.58 per barrel, trading as low as $11.79 a barrel at one point.
The tumult in the oil market mirrors volatility in many others and reflects uncertainty over where the world economy will head as governments begin to loosen controls imposed to contain the coronavirus.
“We could merely be in the eye of the hurricane as the epicenters of its rage remain centred around demand devastation and crude oil oversupply,” Stephen Innes of AxiCorp. said in a commentary.
READ MORE: Oil prices are in the negative — COVID-19 rules to stay home played a huge part