Breaking world news! Oil prices survived the largest collapse in history
All day April 20 quotes on the London Stock Exchange ICE beat anti-records. At about 8 am London time, the cost of a barrel of oil of the American brand WTI (West Texas Intermediate) for the first time in the 21st century fell below $15. However, as subsequent events showed, this was only the beginning: over the next hours, the price fell steadily and passed the $10 mark. A little less than two hours later, a barrel of WTI was already worth less than zero - this alignment means that sellers literally have to pay buyers for the goods, which has never happened before. After another half an hour, quotes dropped to minus 6.89 dollars per barrel, after which trading on the London stock exchange, in accordance with the rules of the site, was stopped. But operations on the New York Mercantile (NYMEX) continued, with the result that the price dropped to minus $40.32 per barrel.
Nobody understands the reasons for the incident.
Metamorphoses occurred with futures contracts providing for the supply of fuel in May. On April 20, trading ends with them, which means that oil workers and professional traders tried to use the last chance to sell the leftovers. WTI is one of the two main grades of oil in the world, along with the North European Brent it is considered the benchmark for the price of which companies in different countries rely on. Historically, a WTI barrel has been cheaper than Brent - the difference is due to the greater remoteness of US fields from end users. WTI exporters are forced to spend more on transportation while maintaining low prices in order to compete successfully with Brent sellers. As a result, they are willing to pay less to the miners. But even in such conditions, the difference between the quotations of the two main world grades usually does not exceed a few dollars per barrel. There is one more nuance: trading in May Brent futures has already ended, and there was no reason for excessive excitement for European fuel. But a similar situation develops every month.
Since the beginning of the year, the world oil market is going through hard times. The collapse of demand due to the coronavirus and the resulting global economic crisis resulted in the March failure of the OPEC + deal to reduce production. As a result, too much unclaimed oil has accumulated in storage facilities around the world. Even the new agreement under the auspices of the Organization of Petroleum Exporting Countries (OPEC), in which many more countries took part, did not give an instant effect - in the near future, the partners' efforts will be aimed precisely at eliminating the excess in the market. However, as analysts point out, physically there is still a place in the vaults and even on the last day of trading the suppliers did not need to sell the goods with all their might, at a loss to themselves. In addition, market participants in one way or another keep in mind the agreement of the largest manufacturers on the planet. The questions and actions of NYMEX executives are raised. The rules of each exchange stipulate a halt in trading in case of too much growth or fall - to cool the ardor of investors. In London, the session ended ahead of time, and in New York, for unknown reasons, continued, no matter what, although both sites are part of the same financial group.