Stormy oil markets sent Brent prices crashing to their lowest since 1999, though a stabilisation of some petro-currencies and a bounce in European stocks gave investors something buoyant to cling to.
The wildest trading in oil market history continued with benchmark Brent down another 10 per cent to $US17 a barrel, having plunged 24 per cent the day before after US crude prices had gone deeply negative.
With coronavirus lockdowns slashing demand for everything from petrol to jet fuel, and markets still bloated by a turf war being fought by Saudi Arabia and Russia, places to store the excess supply are running out.
Christopher Peel, CIO of Tavistock Wealth, said eight oil supertankers were now moored on the river outside his window in the Portuguese capital, Lisbon.
“There is nowhere to put the oil so it shouldn’t come as any surprise to anyone that the front months (oil price contracts) are getting decimated,” he said, adding it should be a temporary situation.
There was encouragement, meanwhile, that Europe’s main stock markets had opened higher after a poor close overnight in New York and a mixed day for Asia.
Focus was on whether European Union leaders, who meet on Thursday, will be able to agree more aid to help the region’s economies cope with the coronavirus outbreak.
The pan-European STOXX 600 index was up just over 1 per cent, after tumbling more than 3 per cent on Tuesday following the collapse in oil prices.
Italian shares gained 1.3 per cent and the government’s bond yield fell after Prime Minister Giuseppe Conte said Italy, one of the countries hit hardest by the pandemic, could start pulling out of strict stay-at-home orders from May 4.
Traders were also buoyed after Italy breezed through a major debt sale on Tuesday and speculation continued that the European Central Bank would provide more support measures.
The five-year US Treasuries yield also rose to 0.33 per cent after hitting a record low of 0.3010 per cent on Tuesday.
Restrictions are tentatively being lifted in a host of other countries and many more are unveiling stimulus measures.
South Africa’s president pledged a $US26 billion rescue package on Tuesday for his country’s economy, which was suffering from anaemic growth even before the coronavirus outbreak.
Mexico unveiled a $US31-billion package and cut its benchmark rate by 50 basis points. South Korea readied a third supplementary budget and a $US32.4 billion fund to prop up its economy.
“If the global economy can reopen in eight weeks or so the damage is done (for equity markets), but the longer-term damage is in the bond markets,” said Tavistock’s Peel.
US stock futures had bounced back to be about 1 per cent higher after Tuesday’s falls.
Originally published as Brent slumps but stocks seemingly recover