US stocks fell sharply on Monday, driven down by news that the petroleum industry was running out of storage capacity, causing prices to plummet. At closing, the Dow Jones Industrial Average index fell by 592.05 points to 23,650.44; the Nasdaq Composite by 89.41 points to 8,56073; and the S&P 500 by 51.40 points, to finish at 2,823.16.
The markets were severely hurt by unexpected events in the oil market, where expectations about the topsy-turvy path of the world economy in the coming months has caused oil prices to plunge into negative territory. The number is due to the way oil prices are set, but according to experts, the notion that “people who had oil to sell were willing to pay to have it taken it off their hands” is not too far off, the New York Times reported.
The Wall Street Journal reported that oil producers who had been filling up tankers and using them as floating storage tanks for when the world economy picks up again after the COVID-19 pandemic were quickly running out of storage space.
“If you can find storage, you can make good money,” Reid I’Anson, economist for market-data firm Kpler Inc, told the publication.
The May contract for West Texas Intermediate, which anticipates what oil will cost next month when it’s actually delivered to buyers, utterly collapsed, sinking by 300% to negative $40.08 per barrel. At the same time, oil that is anticipated to be sold in November, when it is hoped the worst of the pandemic will have passed, was selling at $32.08 per barrel.
The news also comes amid a deal struck between Saudi Arabia and the Russian Federation, two large oil exporters, setting greatly reduced petroleum production quotas.
However, it wasn’t just oil producers whose stocks fell, but oil consumers, too. Airplane maker Boeing, which has been forced to shutter most of its US factories by the COVID-19 pandemic, saw its stocks plunge by 7% on Monday.
According to statistics by the US Department of Labor, more than 22 million Americans have filed for unemployment since the beginning of March, with 5.2 million filing in just the last week, effectively wiping out all job gains of the last decade.
