Is the global economy in a free-fall?
“The crash happened in the US and Canadian oil derivatives market but the theory on which this crash happened is still a matter to worry about for everyone in oil and gas industry… The contagion effect on rest of the markets cannot be ruled out,” said Mayank Sawhney, managing director of MaxGrowth Consulting.
“Ever thought that it could be imaginable to see the price of US oil valued at less than a pizza? Or even a slice of pizza? How about for it to actually cost to sell US crude?” said Jameel Ahmad, head of currency strategy and market research at FXTM. “All of this was previously thought to be unthinkable — but it became very real for traders as the price of US oil turned negative for the first time in history,” he added.
“The most simple explanation for negative oil prices is that... players are now paying buyers to take oil volumes away as the physical storage limit will be reached. And they are paying top dollar,” said Rystad Energy analyst Louise Dickson.
Equity markets
The ripple effect of oil price slump hit equity markets across the globe as analysts warned that the drop in stock markets could be an indication that the recent surge may have been too much and too quick, and another selloff is possible.
The Dubai Financial Market slid 3.3 per cent, dragged down by a 4.8 per cent drop in Emirates NBD and a 4.1 per cent fall in Dubai Islamic Bank. The Abu Dhabi index retreated 2.7 per cent, led by a 4.9 per cent fall in the country’s largest bank, First Abu Dhabi Bank.
Among other GCC bourses, Saudi Arabia’s benchmark index dropped 1.6 per cent, with oil giant Saudi Aramco shedding 2 per cent and petrochemical firm Saudi Basic Industries shedding 3.9 per cent. The Qatari index eased 1.4 per cent while Bahrain and Oman dropped 0.5 per cent and 1.2 per cent, respectively. Boursa Kuwait was down 2.6 per cent.
US stocks opened sharply lower again on Tuesday. Shortly after the opening bell, the Dow Jones Industrial Average was down 2.2 per cent. The broad-based S&P 500 shed 1.8 per cent, while the tech-rich Nasdaq Composite Index
dropped 1.2 per cent.
In Asia, India’s NSE Nifty 50 index closed 3.03 per cent lower at 8,981.45, while the benchmark Sensex ended down 3.2 per cent at 30,636.71. Tokyo shares slumped 2 per cent to 19,280, Hong Kong dropped 2.2 per cent to 23,793 while Shanghai lost 0.9 per cent to close at 2,827 points. The Pakistan Stock Exchange also lost 1,076 points to end at 32,422 points.
European bourses were also down as London’s FTSE-100 fell 2.3 per cent to 5,677 points, Frankfurt lost 3.1 per cent to 10,347 and Paris plummeted 2.9 per cent to 4,395 points.
In currencies, the Indian rupee depreciated to close at record-low level of 76.83 per dollar of 20.93 versus the dirham. The Pakistani currency, meanwhile, strengthened Rs2 to 161.5 on Tuesday.