Oil Price Plummets to Historic Lows; Wall Street Dips

Stocks are slipping in afternoon trading on Wall Street, as the price of oil cratered to historic lows Monday, cheaper than bottled water.

The S&P 500 was down 0.8%, as of 1:30 p.m. Eastern time, after wavering between sharper and milder losses. But the market’s most dramatic action was in oil, where benchmark U.S. crude for May delivery plummeted to a record low below $1.50 per barrel, a 90% drop in just one day.

Much of the plunge was chalked up to technical reasons — the May delivery contract is close to expiring so it was seeing less trading volume, which can exacerbate swings. But prices for deliveries even further into the future, which were seeing larger trading volumes, also plunged. Demand for oil has collapsed so much due to the coronavirus pandemic that facilities for storing crude are nearly full.

Benchmark U.S. crude oil for June delivery fell 12.9% to $21.69 per barrel, as factories and automobiles around the world remain idled. Big oil producers have announced cutbacks in production in hopes of better balancing supplies with demand, but many analysts say it’s not enough.

“Basically, bears are out for blood,” analyst Naeem Aslam of Avatrade said in a report. “The steep fall in the price is because of the lack of sufficient demand and lack of storage place given the fact that the production cut has failed to address the supply glut.”

Halliburton swung between gains and sharp losses, even though it reported stronger results for the first three months of 2020 than analysts expected. The oilfield engineering company said that the pandemic has created so much turmoil in the industry that it “cannot reasonably estimate” how long the hit will last. It expects a further decline in revenue and profitability for the rest of 2020, particularly in North America.

Brent crude, the international standard, was down $1.78 to $26.30 per barrel. Big oil-producing countries have agreed to cut production to help balance supplies with demand, but many analysts say the cuts are not sharp enough to lift prices.

In the stock market, the mild drops ate into some of the big gains made since late March, driven lately by investors looking ahead to parts of the economy possibly reopening as infections level off in hard-hit areas. Pessimists have called the rally overdone, pointing to the severe economic pain sweeping the world and continued uncertainty about how long it will last.

The Dow Jones Industrial Average was down 283 points, or 1.2%, to 243,958. The Nasdaq was close to flat.