U.S. Oil Prices Plunge Into Negative Territory: Live Updates

Oil plummets as storage capacity runs low.

Something bizarre happened in the oil markets on Monday: Prices fell so much that some traders paid buyers to take oil off their hands.

The price of the main U.S. oil benchmark fell more than $50 a barrel to end the day about $30 below zero, the first time oil prices have ever turned negative. Such an eye-popping slide is the result of a quirk in the oil market, but it underscores the industry’s disarray as the coronavirus pandemic decimates the world economy.

Demand for oil is collapsing, and despite a deal by Saudi Arabia, Russia and other nations to cut production, the world is running out of places to put all the oil the industry keeps pumping out — about 100 million barrels a day. At the start of the year, oil sold for over $60 a barrel but by Friday it hit about $20.

Prices went negative — meaning that anyone trying to sell a barrel would have to pay a buyer $30 — in part because of the way oil is traded. Futures contracts that require buyers to take possession of oil in May are expiring on Tuesday, and nobody wanted the oil because there was no place to store it. Contracts for June delivery were still trading for about $22 a barrel, down 16 percent for the day.

“If you are a producer, your market has disappeared and if you don’t have access to storage you are out of luck,” said Aaron Brady, vice president for energy oil market services at IHS Markit, a research and consulting firm. “The system is seizing up.”

Refineries are unwilling to turn oil into gasoline, diesel and other products because so few people are commuting or taking airplane flights, and international trade has slowed sharply. Oil is already being stored on barges and in any nook and cranny companies can find. One of the better parts of the oil business these days is owning storage tankers.

Global stocks fell on Tuesday on expectations of more bad news coming from companies disclosing the financial hits they have taken from the coronavirus outbreak.

Major European markets opened about 2 percent lower after a similar drop in Asia. Futures markets predicted another decline in on Wall Street later on Tuesday, a day after stocks in the United States fell 1.8 percent.

Monday’s stock moves were exacerbated by turmoil in the oil markets, as the price of oil briefly dipped below zero, meaning some holders were ready to pay people to take a barrel of crude off their hands. While quirks in how oil is traded accounted for a lot of the move, it still reflects low global demand for fuel, signaling predictions that much of the world’s economy will remain frozen for some time to come.

The most closely watched price for oil in the United States, for a futures contract stipulating delivery in June, was trading at about $20 a barrel, well away from negative territory but still at historical lows. Brent crude, the global benchmark, dropped 10 percent amid its own contract switch and the reality that the world has more oil that it can use.

Further signaling unease, prices for U.S. Treasury bonds were higher, as investors sought safety in places considered stable.

In Tokyo, the Nikkei 225 index fell 2 percent. Hong Kong’s Hang Seng index fell 2.2 percent. In mainland China, the Shanghai Composite index was down 0.9 percent.

Taiwan’s Taiex index fell 2.8 percent, and South Korea’s Kospi index fell 1 percent.

In London, the FTSE 100 index was down 1.9 percent. Germany’s DAX index was down 2.3 percent, while the CAC 40 index in France was down nearly 2.5 percent.

Nursing homes that were already struggling before the coronavirus outbreak may soon be unable to pay their rent and other bills without government help.

Many have had to spend more money on protective equipment for staff and technology to connect residents with relatives who are no longer allowed to visit. Revenues have shrunk because they are admitting fewer new residents in hopes of reducing the risk of infection.

And even before the pandemic, many were struggling to stay afloat and provide quality care.

For-profit nursing homes often rent their properties under long-term leases from real estate investment trusts, investment firms or private equity shops.

The ownership structure has proved lucrative to investors in major health care real estate investment trusts, which typically own a mix of nursing homes, elder care facilities and medical buildings. But those long-term leases can be problematic during an economic slowdown, because many include clauses to increase their rent every year, according to regulatory filings.

“There wasn’t a lot of wiggle room in these lease deals,” said David Stevenson, a professor of health policy at the Vanderbilt University School of Medicine who has studied the nursing home industry.

On top of that, the coronavirus means added cost. Presbyterian Homes and Services, a Minnesota-based nonprofit operator of 16 nursing homes, estimates that the average 72-bed nursing home is spending an additional $2,265 a day on personal protective gear and an additional $1,500 a day on extra nursing staff.

How many people just had to see “Tiger King”? We’ll probably find out on Tuesday when Netflix reports its first-quarter earnings after the market closes. With stay-at-home orders in place around the world, stockholders are expecting to see a surge in demand.

Here’s what to look for:

Virgin Australia goes into voluntary administration after being denied a bailout.

Stocks on Wall Street tumbled, with shares of energy producers following the price of crude oil lower on Monday.

The S&P 500 fell about 1.8 percent.

Oil producers were among the worst performing shares in the index. Exxon and Chevron both fell more than 4 percent. United Airlines and American Airlines also fell more than 4 percent, after the former said that it had lost almost $2 billion in the first three months of the year.

Technology stocks again fared better than the broader market, with the Nasdaq composite falling about 1 percent. Those stocks have been gaining in part because companies like Amazon and Netflix are seen as able to profit from stay-at-home orders as consumers pullback on spending elsewhere. Netflix, which will report its quarterly earnings results later this week, rose more than 3 percent on Monday.

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