U.S stock futures and crude oil prices plunged immediately after the start of electronic trading late Sunday, as fears of a global oil-price war combined with coronavirus fears to rattle traders.
Oil futures plunged 10% on Friday after talks between the Organization of the Petroleum Exporting Countries and their allies collapsed, with Russia refusing to agree to a Saudi-led plan for additional crude production cuts.
In response, Saudi Arabia over the weekend slashed crude prices and is preparing to increase production, in a direct attack against Russia’s market share, the Wall Street Journal reported.
Goldman Sachs analysts on Sunday said a price war could push crude prices down to $20 a barrel, especially as the economic slowdown caused by the coronavirus outbreak slows global demand. Those price levels “will start creating acute financial stress and declining production from shale as well as other high-cost producers,” Goldman warned.
“Friday’s oil market sell-off was only a dress rehearsal,” wrote Stephen Innes, chief market strategist at AxiCorp, early Sunday. “A new oil world order has arrived, and it will be pronounced by a greater uncertainty principle that will see volatility ratchet higher and oil prices drastically lower as traders agitatedly re-price the curve.”
On the COVID-19 front, Italy virtually locked down its northern region, containing about a quarter of its population, on Sunday in an effort to slow the spread of the coronavirus outbreak. Meanwhile, a number of schools closed in California and events were canceled, as a cruise ship hit by coronavirus prepared to dock in Oakland on Monday, with authorities preparing plans to transport the 3,500 passengers to military bases around the country for testing and quartantine. As of Sunday, the virus had sickened 107,897 people worldwide, with 3,658 deaths.
On Friday, the Dow Jones Industrial Average
settled 256.50 points lower, or 1%, to 25,864.78, while the S&P 500
lost 51.57 points, or 1.7%, to close at 2,972.37. The Nasdaq Composite
finished 162.98 points lower, or 1.9%, at 8,575.62.
Mark DeCambre contributed to this report.