Stocks rebound, but cheap oil looks here to stay

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Good morning, and Happy Earth Day. Fittingly, I’m seeing plenty of green on the screens. Oil traders though are singing the blues this morning.

Let’s see where investors are putting their cash. Hold onto your hat.

Markets update


  • Asia is mixed. Japan’s Nikkei is down, but the Hong Kong and Shanghai indices rebounded in afternoon trade there.
  • Oil again is in the spotlight. Futures contracts for Brent crude, the international standard, fell to a 21-year-low during Asian trade. The markets’ rejection of oil may seem like an Earth Day stunt. If only.
  • To India now where Facebook cannily sealed a $5.7 billion investment in Jio Platforms, one of the world’s fastest growing tech companies in one of the fastest growing markets. Facebook is popping in after-hours trade.


  • European bourses all opened in positive territory with the benchmark STOXX Europe 600 Index up nearly 1%.
  • From lockdown to restarts. The focus is now on the latter as coronavirus case numbers continue to decline across the continent, particularly in Italy, Spain and France.
  • Heineken this morning laid out the thorny path to recovery exporters face. Coronavirus sank beer volumes in March. That was expected. But the brewer also admitted it’s getting hit with an FX shock from emerging markets.


  • The Dow, S&P 500 and Nasdaq look to open in positive territory today after two consecutive days of declines. The Dow fell 631 points yesterday.
  • Yesterday’s earnings calls again revealed it’s not all doom and gloom out there. Netflix, Texas Instruments and Snap reported sales beats. Coca-Cola, meanwhile, withdrew 2020 performance guidance. 
  • Some relief for SMEs: The Senate agreed to $480 billion in additional coronavirus aid, which includes $310 billion in paycheck protection funds. Fortune‘s Anne Sraders lays out what you need to know about the bill.


  • Gold is up again.
  • The dollar is down.
  • Crude buyers are hard to find today. WTI and Brent June futures contracts are again testing new lows this morning. The turmoil in the oil markets prompted OPEC+ to convene an emergency call yesterday. The oil powers then issued a nothing-to-see here statement.

Crude math

As global oil prices plunged in recent weeks, we focused largely on one big culprit: the Saudi-Russian price war. The two oil giants, combined, bumped up production even as demand collapsed in the wake of a global economic lockdown. Not smart. You know what else wasn’t too smart? The actions (or lack of action) by American suppliers, the Refinitiv oil analyst Yaw Yan said in a research note yesterday.

“The US benchmark WTI May contract’s collapse into negative territory is a consequence of the US government’s refusal to regulate oil production and impose mandatory cuts, despite calls to do so during the G20 recent meeting that had led to historic cuts of 9.7 million bpd by the OPEC+ alliance,” Yan wrote.

“As of the week of Apr 12, the US was still producing vast amounts of crude at 12.3 million bpd, according to figures from their Energy Information Agency, down from 13 million bpd in March. This is still the largest production figure in the world, and in a pre-production cut environment at that.”

So as it became clear the global markets were swimming in oil, what did American producers do? They continued to pump full blast. Yes, plenty of rigs were shut down, but overall production continued at a break-neck pace. Now WTI futures contracts as far out as August are under pressure, and the global benchmark, Brent, is also sinking.

The Saudis and Russians wanted to put the squeeze on U.S. shale producers. Mission accomplished. But U.S. producers appear to have made matters even worse.

Usually, U.S. crude producers can fairly easily find a buyer, no matter the price. But with overseas markets overstocked, it’s become an impossible sell. As Vincent Elbhar, co-founder of Swiss hedge fund GZC Investment Management, told the Wall Street Journal, “the world doesn’t want to take U.S. barrels.”


Yesterday, Rome quietly celebrated a birthday. As the story goes, the Eternal City was founded 2,773 years ago—probably the last time the place was this quiet.

As the Rome-based reporter and frequent Fortune contributor Eric J. Lyman wrote in USA Today, “Italy’s ancient capital has endured dozens of plagues and pandemics, but also invasions, sackings, civil war, fires, floods and earthquakes. And now, of course, coronavirus.”

The Circus of Maxentius, a fourth-century structure built by Emperor Maxentius.
The Circus of Maxentius, a fourth-century structure built by Emperor Maxentius.
Bernhard Warner

Happy birthday, Rome. I miss her more every day.


Have a nice day, everyone. I’ll see you here tomorrow.

Bernhard Warner

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Today's reads

...and chill. Netflix added a record 15.8 million subscribers in the first quarter—more than double Wall Street estimates—as viewers confined to their homes by the coronavirus outbreak searched for entertainment, Fortune’s Aric Jenkins reports. Shares initially surged as much as 11% in after-hours trading, but, as of this writing, are little changed as investors focused on Netflix’s cautious outlook.

Time to talk taxes. The gigantic new spending enacted to combat coronavirus is set to add trillions of dollars to America’s national debt, bringing the day when the debt burden will have to be tackled far closer. Probably within the next decade, the U.S. will need to impose monumental tax increases. What America’s leaders aren’t saying is that it’s the middle-class Americans working today, the autoworkers, nurses, and deli owners, and not just future generations, who'’ll foot most of the bill, warns Fortune’s Shawn Tully.

Super (storage) tankers. About 80 supertankers are being used to store oil rather than carry it to distant ports, Saudi officials now acknowledge. It’s a consequence of Saudi Arabia’s oil-price war with Russia which flooded the market with crude at a time when demand had dried up and buyers are hard to find due to the coronavirus pandemic. A looming shortage of storage space is forcing producers to consider new measures to stop the rout, including to store the stuff at sea, The Wall Street Journal reports.

Market candy

This day in history

On April 22, 2010, the Deepwater Horizon rig drilling in a BP-operated oil prospect in the Gulf of Mexico sank two days after an explosion and fire on board killed 11 workers. It was the worst offshore oil spill in U.S. history, causing one of America’s worst environmental disasters. BP, which pleaded guilty to criminal misconduct over the spill, has paid out around $65 billion in compensation and other costs.

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