The oil industry was plunged even deeper into crisis last night after the benchmark price for US oil fell below $0 a barrel.
The staggering free fall in the value of West Texas Intermediate oil, which is the reference point for buyers and sellers in North America, came as traders fretted that the world is fast running out of storage space for excess oil.
By falling below $0 a barrel – to as low as minus $40.32 at one stage – it means that at points, oil producers were paying traders to take oil off their hands in order to delay a shutdown of their fields.
The value of a barrel of West Texas Intermediate crude oil, which is the reference point for buyers and sellers in North America, plummeted 40 per cent to a 21-year low of $11.38
The source of the panic has been an unprecedented fall in demand during the coronavirus pandemic, as widespread travels restrictions mean around a third less oil is being used than before the outbreak.
The share prices of London’s biggest oil firms have been hammered by this drop since February – but the latest turmoil wasn’t reflected in their closing prices yesterday.
BP lost 0.4 per cent, or 1.25p, to 302.3p, Shell rose 0.1 per cent, or 1.8p, to 1345p, while the likes of Premier Oil shed 1.5 per cent, or 0.38p, to 24.23p and Tullow lost 4.2 per cent, or 0.78p, to 17.62p.
In part this is because Brent crude, which is the global benchmark UK-listed companies are usually tied to, fell around 10 per cent to $25 a barrel.
But it was also because the most extreme falls into negative territory occurred after the London market had closed.
Stock Watch – Maestrano
Shares in artificial intelligence group Maestrano jumped 25.7 per cent, or 0.45p, to 2.2p on the back of a surprise first-quarter trading update.
Revenues rose 20 per cent, losses narrowed by 82 per cent and expenses halved in that time for the firm, whose main Airsight division uses drones to inspect the space around areas such as rail tracks and industrial sites.
The group will not usually update every quarter but was ‘so delighted’ with recent progress it wanted to share that with investors.
This latest turmoil will put the industry under even more strain and could, as many analysts worry, topple the more fragile companies in the US industry.
It will also undo much of the remaining optimism about a deal struck between Russia, Saudi Arabia and a slew of other countries to cut production.
Fears BP and Shell could have to cut their all-important dividends will undoubtedly come back under the spotlight – though both have so far committed to their shareholder payouts – and traders will be watching every move to see how this latest crash reverberates outside of the US south.
The FTSE 100 rose 0.45 per cent, or 25.87 points, to 5812.83 despite housebuilders including Barratt Developments (down 5 per cent, or 24.6p, to 461.1p) and Persimmon (down 2.2 per cent, or 43p, to 1955p) falling after figures from Rightmove (up 1.1 per cent, or 5.2p, at 487.5p) showed the housing market has virtually ground to a halt.
But the FTSE 250 lost 0.23p, or 36.56 points, to close at 15822.73.
Mid-cap pub group Marston’s secured a waiver to avoid breaching any of its loans as a result of the extended lockdown. It said this was a ‘precautionary measure’, but shares slid 3.8 per cent, or 1.54p, to 38.72p.
Shareholders in mid-cap magazine publisher Future were nonplussed by news it has completed its takeover of TI Media and that digital subscriptions are ‘performing well’, despite a slowdown in advertising. Its stock was went up 2 per cent, or 20p, to 1040p.
Casino operator Rank (up 0.6 per cent, or 1p, to 168p) became the latest big firm to scrap its dividend as it furloughed 7,000 staff.
But Footsie-listed gold miner Polymetal held onto its divi after a jump in gold prices helped lift revenues 9 per cent in the first quarter.
Sticking to the shareholder payout didn’t help shares early on, but eventually it turned out fine as they closed up 1.6 per cent, or 25p, at 1546p.
Over on AIM, Brazil-focused nickel miner Horizonte Minerals shot up 16 per cent, or 0.33p, to 2.35p after figures showed demand for stainless steel is rising in China, where industrial production is chugging back to normal levels.
Stock broker WH Ireland confirmed reports it is in talks to buy all or part of the European arm of Wall Street investment bank Cantor Fitzgerald. Shares were flat at 43.5p.