Brent touches 2-decade low as stocks make some headway
dubai — Brent oil hit a two-decade low on Wednesday as stock markets across the globe, buoyed by trillions of dollars of unprecedented stimulus measures initiated by governments and central banks, made modest gains after recent heavy falls triggered by plummeting oil.
Brent touched $15.98 a barrel, its lowest since June 1999, before turning around. As of 1720GMT, Brent was up $1.54, or 8 per cent, at $20.87 a barrel. Earlier in the session, the global benchmark fell to $15.98, its lowest since June 1999. US West Texas Intermediate (WTI) crude futures for June delivery rose $3.09, or 26.7 per cent, to $14.66 a barrel.
WTI had dropped by almost 50 per cent in the past five days, highlighting concerns about a glut of supply, a lack of storage space in the US and crashing demand for energy around the globe.
After two down sessions, Wall Street stocks opened higher on Wednesday following strong earnings from Netflix and some other companies. About five minutes into trading, the Dow Jones Industrial Average stood at 23,478.69, up 2 per cent.
In Asia, Tokyo’s Nikkei 225 fell 0.7 per cent to 19,137.95. The Shanghai Composite Index closed up 0.6 per cent at 2,843.98 after spending the day swinging between gains and losses. The Hang Seng in Hong Kong added 0.4 per cent to 23,893.36. The Kospi in Seoul rose 0.9 per cent to 1,896.15 and Sydney’s S&P-ASX 200 was unchanged at 5,221.20. New Zealand’s main index rose 1 per cent and Jakarta gained 1.5 per cent. Singapore was down 0.2 per cent.
Gains across Asia and Europe were modest despite investor fears that the rout in crude could exacerbate the deep global economic downturn kindled by the Covid-19 pandemic outbreak.
Indian shares ended sharply higher, driven by a 10 per cent surge in Reliance Industries after Facebook invested $5.7 billion in the conglomerate’s digital business. The NSE Nifty 50 index closed 2.29 per cent higher at 9,187.3, while the benchmark S&P BSE Sensex was up 2.42 per cent at 31,379.55.
India has so far announced only one round of budget stimulus worth about $23 billion unlike by other major economies that committed trillions of dollars.
Amid the sense of unease on the trading floor with many firms struggling to provide forecasts as they try to assess developments in the pandemic, which has shattered their bottom lines, Netflix has reported soaring profits, with subscriptions surging by almost 16 million at the streaming service thanks to lockdowns worldwide.
“After record subscriber additions, Netflix is and will continue to be the media company least impacted by Covid-19,” said eMarketer forecasting analyst Eric Haggstrom. “Oil volatility is still front and centre for the trading community,” said Joshua Mahony, senior market analyst at IG trading group.
Crude’s rout which saw producers pay clients to take it off their hands “merely reflects the underlying theme that there is no demand for physical oil, and there is nowhere to store it”, concluded AxiCorp’s Stephen Innes.
The plunge in oil prices “has stirred wider concerns of a sharp economic slowdown,” analyst Hayaki Narita of Mizuho Bank said in a report. The protracted crisis in the oil market compounded by the coronavirus and a price war could not be resolved even after Opec+ reaching an accord on a historic 9.7mbp output cut, starting from May.
To prop up the plunging prices, producers are already considering further steps.
Saudi Arabia on Tuesday said it was ready to take extra measures with other producers. Iraq made similar comments, although the next formal Opec+ meeting is in June.
The dollar declined to 107.64 yen from Tuesday’s 107.68 yen. The euro gained to $1.0870 from $1.0853