Global demand for oil has fallen considerably due to the coronavirus lockdown and now oil prices are reaching historic lows. Brokerage platform Trading212 has suspended the oil futures contract in the wake of this situation.
Which futures were canceled?
Trading212 has canceled Oil-21Apr futures contracts. The broker released a statement, writing,
“Oil-21Apr has been suspended for trading as the contract is absolutely illiquid. We will rollover all open positions with Oil-21Apr to the next contract Oil-19May-20 due to unforeseen circumstances.”
On Monday, oil prices took historic blows as US crude futures plunged 100%, going negative for the time before going back to the $1-$2 territory. The West Texas Intermediate (WTI) gave traders shivers down their spine as the benchmark went below minus $40 for some time. Between 12:01 pm and 2:28 pm on Monday, the benchmark went from $10.39 to minus $6.89. It hit $0 at 2:16 pm.
What led to the crash?
The oil price crash occurred as the US filled up its crude storage and international markets like Japan and German sent weak signals. The demand for crude oil has dropped heavily because of lockdowns to contain the coronavirus pandemic. The global lockdown situation has reduced demand for fuel across the globe and major economies are at a standstill. Oil companies now have to rent storage facilities for their surplus production. If they don’t, they will have to dump this produce.
The price of June WTI has also dropped significantly. However, it is still higher than the latest prices at $20 per barrel. The Brent Crude benchmark, which is used by Europe and the rest of the world, slipped 8.9% to $26 per barrel. OPEC countries and Russia are now forced to cut down production by record numbers as there is already a surplus that they can’t sell.
At the same time, Hin Leong Trading, one of the leading oil companies in Singapore has revealed that it is struggling with its books. The company failed to disclose over $800 million in losses from its investors for years. The company owes $4.3 billion to lenders including HSBC Holdings, OCBC Bank and DBS Group Holdings. All lenders are now approaching the bank.