Premarket stocks: American oil crashes below $0 a barrel — a record low

The sun sets behind an idle pump jack near Karnes City, Texas, Wednesday, April 8, 2020. Demand for oil continues to fall due to the new coronavirus outbreak. (AP Photo/Eric Gay)

What is happening: US oil prices plunged, falling below $ 0 Monday to -37.63 $ a barrel. This is the lowest level since NYMEX opened oil futures trading in 1983.

The liquidation can be partly attributed to the mechanics of the market. West Texas Intermediate’s May benchmark, the US benchmark, is about to expire. Most investors are already focusing on the June contract, reducing transaction volume and fueling volatility, said Giovanni Staunovo, analyst at UBS.

The June futures contract for the WTI is trading around $ 22 a barrel, but it is still significantly lower that day. Brent crude futures, the global benchmark, fell 8% Monday to $ 25.81 a barrel.

The extreme pressure on the WTI contract for May highlights lingering concerns about the supply and demand dynamics plaguing the oil market.

“No one in America wants short-term oil,” Oanda’s Jeffrey Halley told Monday.

Saudi Arabia, Russia and other producers tried to push prices up with a deal last week to cut production by 9.7 million barrels a day in May and June, the deepest drop ever negotiated . But this should not absorb the glut of supply caused by the evaporation of energy demand.

According to Staunovo, the oil storage facilities are still at risk of overflowing, which increases the chances that some oil producers in the United States and Canada will start paying customers to remove the crude.

Investors are particularly concerned that storage will reach capacity in Cushing, Oklahoma, the main American hub.

Rystad Energy, a consulting company, expects US commercial crude oil stocks to reach record levels by the end of April and continue to increase until May.

The most disappointing results season since 1998?

After the big American banks, Coca Cola ((Knockout), Netflix ((NFLX), Delta ((DAL), IBM ((IBM) and Intel ((INTC) are among the big American companies that should publish their results this week.

The first is IBM, which is on deck Monday after the US markets close.

Less than 10% of S&P 500 companies have reported results for the period January to March to date. So far, they have “generally disappointed with lukewarm expectations,” according to David Kostin, chief US equity strategist at Goldman Sachs. The investment bank estimates that 43% of businesses have missed Wall Street forecasts, at the highest rate since at least 1998.

FactSet analyst John Butters predicts that profits from the S&P 500 fell 14.5% in the first quarter. This would be the largest year-over-year decline in the index since the third quarter of 2009.

Watch this space: much of the focus will be on annual profit expectations, as investors try to assess how the coronavirus pandemic will hit businesses over a longer period of time. But Kostin notes that most strategists have completely canceled 2020 and are already considering 2021.

US stocks have risen three of the past four weeks

Futures contracts in the United States are closed on Monday as global stocks struggle to find direction and oil crashes. But taking a step back, the stock market seems to be in recovery mode.

See here: The S&P 500 has jumped three of the past four weeks after plunging into the fastest bear market in history.

Of course, the whole situation is complicated. “What is confusing for the markets right now is the huge dichotomy between what may be one of the worst synchronized global economic downturns in history and what is arguably the biggest never done, “Deutsche Bank strategist Jim Reid said on Monday.

Deutsche Bank noted last week that major central banks had increased their balance sheets by $ 2.7 trillion, two-thirds of which came from the United States Federal Reserve. But the negative economic data could continue to cause problems for investors who are ready to recover from riskier assets, with uncertainty as to the duration of the bottlenecks remaining a key problem.

next

Ally Financial ((ALLY), M&T Bank ((Mountain biking) and Truist ((TFC) declare profits before the opening of American markets. IBM follows after the close.

Also today: the United Kingdom and the European Union are resuming talks on their future relationship after Brexit.

Coming tomorrow: Coca-Cola and Netflix announce profits.

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