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U.S. Oil Prices Plunge Into Negative Territory: Live Markets Updates

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Oil plummets as storage capacity runs low, and a quirk in pricing wipes out one benchmark.

Something bizarre happened in the markets on Monday: The price of a barrel of oil went negative.

Oil prices tumbled as the economic crisis set off by the coronavirus pandemic continued to destroy demand for energy, and as concerns grew that storage tanks in the United States are near capacity and unable to hold all the unused crude.

Oil that is scheduled to be delivered in June fell 12 percent Monday to about $22 a barrel, but at the same time a benchmark for oil to be delivered next month was essentially deemed to be worthless. Owing largely to a quirk in the way that oil prices are set, the May benchmark actually fell into negative territory, suggesting people who had oil to sell were willing to pay people to take it off their hands.

The problem is that the United States is running out of places to store its oil.

Oil is already being stockpiled on barges out at sea, and in any nook and cranny companies can find in their storage facilities. Now, traders are worrying that even this space is running out. Under futures contracts, West Texas Intermediate — the American oil-price benchmark — is delivered to Cushing, Okla., but investors are worried that there will be no place to put it there.

“Cushing inventories continue to increase at record-high rates and are expected to hit tank tops in May,” said Hillary Stevenson, director, oil markets, at Genscape a market intelligence firm.

Broader worries also growing that the deal reached on April 12 between the Organization of the Petroleum Exporting Countries, Russia and other producers will not be sufficient to prevent the oil markets being overwhelmed with a record surge of surplus oil. With much of the world in lockdown because of the coronavirus pandemic, global demand for oil has collapsed, leading to record surpluses.

The numbers explain why investors are worried. Under the terms of the arrangement brokered by President Trump, Saudi Arabia, Russia and other countries to cut will cut 9.7 million barrels a day in production, beginning in May. Analysts forecast that oil consumption in April will fall by about three times that.

“It is not enough” to avoid inventories rapidly building up, said Bjornar Tornhaugen, head of oil markets at Rystad Energy, a consulting firm.

On Monday, Halliburton, which provides equipment and services to energy companies, gave an early indication of the damage being sustained by the industry when it reported a $1 billion loss in the first quarter compared with net income of $152 million in the same period a year earlier.

Oil companies will either have to turn the taps off or see storage rise to tank-busting levels. David Fyfe, chief economist at Argus Media, a commodities pricing firm, expects tank farms around the globe to fill to the brim by the middle of May.

Small-business owners say big banks ignored them in favor of wealthy clients.

Small-business owners have accused some of the country’s largest banks of unfairly prioritizing applications from their wealthiest clients for aid under the government’s $349 billion stimulus.

Customers of JPMorgan Chase and Wells Fargo have sued the banks in federal court, saying data provided by the Small Business Administration on the average size of the loans shows they doled out funds to larger customers first.

The S.B.A., which is administering the stimulus program, known as the Paycheck Protection Program, required the banks to handle applications on a first-come, first-served basis, but they had wide latitude on whose applications to accept.

The lawsuits — two against Chase and one against Wells Fargo — say that the banks chose which applications to accept first, and smaller customers were not given the chance to apply as quickly as larger ones in some cases. In other instances, the lawsuits say, the banks sat on some smaller customers’ applications instead of immediately submitting them to the S.B.A. for approval.

Longstanding requirements for banks to know their customers’ backgrounds and sources of funds meant it was easier for them to take existing customers’ applications than allow new customers to gain access to the program. Some lenders, like Bank of America, turned away any applications they received from borrowers who had also gotten a loan or a credit card from another bank.

Chase said in a statement on its website on Sunday that some of the disparity between the speed at which certain clients’ applications were processed compared with others had to do with which parts of Chase’s sprawling operations the clients applied to for help. “Within each business, we did not prioritize certain clients, large or small,” it said.

A Wells Fargo spokeswoman declined to comment on the lawsuit.

Shake Shack says it will return its $10 million loan, while the restaurant industry asks for a bailout.

Shake Shack said it was returning a $10 million loan from a federal program to help small businesses amid mounting criticism that large chains had been favored over smaller operators in the program’s rollout to the restaurant industry.

The $349 billion stimulus effort, which was distributed on a first-come, first-serve basis, was exhausted in just two weeks, with many loans favoring larger companies that were better able to navigate the application process. Major chains like Potbelly and Ruth’s Chris Steakhouse were able to secure tens of millions of dollars in loans while other owners were left scrambling to survive the deepening financial crisis.

Shake Shack, with 189 outlets and nearly 8,000 employees in the United States, said on Sunday that it would return the $10 million in funds it had received, after securing additional capital through an equity transaction on Friday.

But the return of those funds may come too late for the thousands of independent restaurateurs across the United States who are searching for a lifeline to survive the coronavirus pandemic.

The National Restaurant Association on Monday asked congressional leaders to create a recovery fund for the restaurant industry. In the letter, the trade association said that eight million restaurant employees had been laid off or furloughed and that the industry had lost $30 billion since March, with another $50 billion expected to disappear by the end of April.

“The restaurant industry has been the hardest hit by the coronavirus mandates — suffering more sales and job losses than any other industry in the country,” the letter said. “For an industry with sales that exceed the agriculture, airline, railroad, ground transportation, and spectator sports industries combined, a restaurant relief and recovery program is desperately needed.”

On Monday, Congress and the Trump administration were moving toward a deal to replenish funds for the small-business loans program, known as the Paycheck Protection Program. The $450 billion spending deal being discussed would also provide additional funds for hospitals and testing.

But lawmakers and the administration have struggled to break an impasse over the funds, after Democrats insisted on coupling the infusion to the program with other provisions to counter the impact of the pandemic.

Richard Branson offers to put up his private island as collateral.

Sir Richard Branson pleaded publicly with the British government on Monday for taxpayer support of his Virgin Airlines, and even suggested that he would put up his private Caribbean island as collateral.

In a blog post, Mr. Branson noted that Virgin Atlantic employees had already agreed to reduce their wages for eight weeks, but added that the airline would need help from the British taxpayers. “Without it, there won’t be any competition left and hundreds of thousands more jobs will be lost, along with critical connectivity and huge economic value,” he wrote.

The plea came days after The Financial Times reported that government officials had told Virgin Atlantic to resubmit its request for a package of commercial loans and guarantees worth 500 million pounds, or $622 million. The newspaper added that the government was concerned the carrier had not exhausted other fund-raising options before asking for public support.

The post was also published after critics noted that Mr. Branson’s personal net worth is about $4.4 billion, and that his primary residence is Necker Island in the British Virgin Islands, long known for its low tax rates. But Mr. Branson argued that his net worth was tied up in his ownership of Virgin companies, instead of cash in a bank account.

Wall Street internships won’t be the same this year.

With much of New York City on lockdown, many college seniors have a new anxiety: what will happen to their much-coveted Wall Street internships? Today’s DealBook newsletter has the rundown of what several big financial firms are doing.

Many are pushing back their start dates, with Citigroup, Goldman Sachs and JPMorgan Chase all delaying their internships to July 6, from June. All three banks told interns that they would still be paid for the entirety of the nine to 10 weeks that their programs were scheduled to run.

Some are going virtual. Morgan Stanley has told incoming interns that most of its program this year will be held online. After receiving notice that JPMorgan was making its internship program virtual, one poster on the Wall Street Oasis forum wrote, “R.I.P. to all those shirts and pants I bought.”

Most importantly, Citi gave its intern class extra reassurance that one element of its summer internship program remained unchanged: Interns in New York, London, Hong Kong, Singapore and Tokyo will still receive full-time job offers upon graduation, as long as they meet the minimum requirements of the internship program.

United Airlines lost more than $2 billion in the first quarter, a decline driven by the virtual stalling of the global airline industry in March, the company said in a securities filing on Monday.

The carrier said that it expected to receive access to a $4.5 billion loan from the Treasury Department under the economic relief law passed several weeks ago. United had already received about $5 billion from the federal government, mostly in grants intended to pay employees through September.

If United decides to draw down the loan, in exchange it will have to provide the Treasury with warrants giving it the right to buy stock in the company, as it already did for a portion of the funds to pay workers. The new warrants would allow the government buy a $450 million chunk of United, or 14.2 million shares at a price of $31.50 each.

In the first quarter, United earned $8 billion in revenue, a 17 percent decline from last year. The carrier also said it had $6.3 billion in cash on hand, including about $2 billion in undrawn credit.

The airline has cut its schedule by 80 percent in April and expects to cut it by 90 percent in May and June.

Wall Street tumbles in a day of unsteady trading.

Stocks fell on Monday, following tumbling oil prices and a slump in energy shares that exemplified the disruption of the global economy wrought by the pandemic.

The S&P 500 was down more than 1 percent at 2:30 p.m. It had earlier pared some losses after lawmakers in Washington signaled they were making progress on a new deal to fund a small-business loan program.

Energy stocks were the worst performers in the S&P 500, as crude oil prices plunged, but the drop was offset partly by a rally in technology stocks. Those stocks have been gaining in part because companies like Amazon and Netflix are seen as able to profit from stay-at-home orders as consumers pullback on spending elsewhere. Netflix, which will report its quarterly earnings results later this week, rose nearly 4 percent on Monday.

Also helping temper losses were expectations that Congress and the White House were close to approving a $450 billion spending deal aimed at small businesses. Continued effort to bolster the economy, reopen businesses, and contain the pandemic have helped lift stocks from the depths of their collapse in March.

In recent days, though, stocks have settled into a middle zone: far from the low levels that clearly signaled a bear market, but not conclusively blossoming into a new bull market either.

“You could almost argue that we’re in a bull market and a bear market at the same time,” said Eddie Perkin, the chief equity investment officer at Eaton Vance, a Boston-based money manager.

Catch up: Here’s what else is happening.

  • Tapestry, the owner of Coach, Kate Spade and Stuart Weitzman, said on Monday that it would extend salary and benefits to most North American retail employees through May 30. The company will also cut 2,100 part-time associates across the three brands starting April 25, and give them a $1,000 one-time payment “to reduce the financial burden of this action.” Tapestry said that all of its stores in mainland China had now reopened.

  • The Australian government said on Monday that Google and Facebook would have to pay media outlets for news content in the country, part of an emerging global effort to rescue local publishers by moving to compel tech giants to share their advertising revenue.

Reporting was contributed by Michael de la Merced, Emily Flitter, Stanley Reed, David Yaffe-Bellany, Niraj Chokshi, Carlos Tejada, Austin Ramzy, Adam Satariano, Sapna Maheshwari, Jason Karaian, Ron Lieber, Ben Casselman, Jim Tankersley and Kevin Granville.


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