Oil Goes Negative, Which markets are most impacted?
By Eliman Dambell
Yesterday started with Oil having reached a 21 year low, however as the day progressed this was only to get worse. Markets for the first time in history went negative, with Oil suppliers paying buyers to take barrels off their hands. As alluded to in yesterday’s news.
The fall in Oil has wider ramifications as multiple markets moved as a result of the historic shift in prices. From equities and indices, to currency markets. Many nations which gain a substantial amount of GDP from Oil, have seen their currency fall as a result.
The on-going COVID-19 pandemic has created several casualties, from the loss of life, national lockdowns, mass unemployment and now the “death of Oil”.
So which markets have so far been most impacted by the “death of Oil”
In recent weeks the fall in Oil prices have seen Russia as one of the most impacted nations. With the country’s natural resources accounting for around % of its GDP, the decline in prices has meant a huge blow to it’s economic position.
Yesterday’s fall in Oil saw the Ruble , USDRUB move from 73 – 76 against the Dollar, in it’s biggest one day rise against the Dollar since last month, when the panic surrounding COVID-19 first hit. Since then Russia was somewhat forced to end a “Oil war” with OPEC, Saudi Arabia in particular, however even the 9.7M barrel production cut agreed last week, was not enough to stop the biggest bear run in the history or Oil trading.
Another nation who relies heavily on oil for it’s GDP, is Canada. The North American powerhouse currently sees 30% of its GDP coming from Oil related revenues. USDCAD is usually one of the most popularly traded currency pairs in the world, and recent days has seen the market volatility surrounding this pair continue to increase.
The rate moved from 1.40 – 1.426 in all but a matter of hours, at the same time we saw the Ruble suffer a similar shift in movement.
Recent rallies in the FTSE 100 were also ended on the news of the Oil bear market. With BP and Shell both listed on the UK’s main Index, as share prices in the 2 powerhouses fell, this translated into losses on the overall index itself. After recently dropping to as low as 4748, the FTSE has slowly been rallying in recent weeks, as investors in the UK saw the selloff as an opportunity to buy low. However the news of Oil led to markets not only failing to break the price resistance of 5818, but falling to a low of 5638 in the process.
Another index which has exposure to huge Oil companies is Australia’s AUS200. With close to 7% of companies on the index from the energy sector, the likes of BHP. This index has so far seen the biggest decline of all other major indices across the globe. Dropping from 5519 – 5149 in the last few days due to the current situation with Oil.