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Stock market futures sink as oil drops to 21-year low.

Stock futures fell Monday morning, taking a pause after last week’s steep advances. U.S. oil prices sank to a 21-year low as supply and demand concerns exacerbated by the coronavirus pandemic escalated further.

The May contract for U.S. West Texas intermediate crude oil, which expires on Tuesday, dropped 27.91% to $13.17 per barrel as of 6:48 a.m. ET Monday. The June contract for the commodity dropped 8.9% to $22.80 per barrel.

“It should be noted however that near-term WTI prices are trading at massive discounts to later-dated contracts – primarily due to concerns about the storage hub in Cushing [Oklahoma] filling to capacity,” Deutsche Bank analysts wrote in a note Monday.

Prices for Brent crude oil, the international standard, also fell Monday morning, albeit by a less extreme margin than prices for U.S. oil. Brent was down 3.85% to $27.00 per barrel Monday morning.

“With a huge surplus in crude products filling inventories on land, there is a clear benefit to those producers whom are able to put their oil out to sea,” Joshua Mahony, senior market analyst at IG, wrote in an email.

“Unfortunately, the lack of demand and landlocked nature of production in the U.S. and Canada has already started to provide negative prices across a number of crude products in North America.”

The declines extend a months-long drop for the commodity prices, which have been anchored both by fears of a supply glut and demand destruction due to the coronavirus pandemic.

Over the weekend, coronavirus cases topped 2.3 million globally, and the death toll rose above 164,000, according to Johns Hopkins data. U.S. confirmed cases totaled more than 755,000.

In New York state, the U.S. epicenter for the outbreak, Governor Andrew Cuomo said during a Sunday briefing that data showed the region was “past the high point” of the pandemic.

The death toll rose by 507 as of Saturday, or well below the levels of over 700 daily new deaths reported about a week ago. New hospitalizations fell from the previous day to 16,213, from 16,967.

Last week, the Trump administration outlined a three-phase plan for states to each gradually bring businesses and other daily operations halted during the pandemic back online.

Still, individual state officials have been hesitant about announcing a near-term easing of social distancing standards in absence of widespread testing or viable treatment or vaccine.

Northeast states led by New York last week extended social distancing measures to at least May 15.
Distancing measures have helped keep new coronavirus cases in check but also contributed to broad economic stress in the U.S., triggering a staggering 22 million individuals to file for unemployment insurance over the past four weeks alone. Even when distancing begins to let up, many economists warn recovering these losses will take time.

“A double-digit rebound in GDP growth in the third quarter still seems like a decent bet, but it won't recover all the lost ground,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note Sunday. Shepherdson’s anticipation is for a 30% annualized drop in GDP in the second quarter, a margin about in-line with many other economists’ grim outlooks for the quarter.

“That can't happen if, for example, restaurants have half the seating density than in the pre-virus era, cinemas can sell only one third of their seats, and airlines have to leave the middle seat empty,” he added.

“No matter how much fiscal stimulus Congress pumps in—and more is coming—earnings across wide swathes of the economy will be crushed for an extended period.”

21. S. policymakers have been working on providing further relief to the small businesses hit hardest by the coronavirus. During an interview with CNN Sunday, Treasury Secretary Steven Mnuchin said congressional lawmakers were “very close to a deal” that would inject another $300 billion to the Paycheck Protection Program (PPP), which provides funds to help small-sized employers keep workers on the payroll as social distancing measures remain in place. House Speaker Nancy Pelosi echoed lawmakers’ nearness to reaching a deal for the additional funds in a separate interview Sunday.

The PPP first passed in Congress’s $2.2 trillion stimulus package late last month ran out of funds in less than two weeks.

US crude crashed to below $15 a barrel Monday, its lowest level for over two decades, with traders concerned that storage facilities are filling up as the coronavirus pandemic strangles demand.

West Texas Intermediate (WTI), the US benchmark, plunged rapidly in opening trade in Asia and was changing hands for $14.90 a barrel in the afternoon, down 18.45 percent.

International benchmark Brent was less badly affected, as the storage concerns mainly relate to WTI facilities in the US, and was down three percent at $27.23 a barrel in the afternoon.

Oil markets have plunged in recent weeks as lockdowns and travel restrictions to fight the coronavirus around the world batter demand.

The crisis was compounded after Saudi Arabia, kingpin of exporting group OPEC, launched a price war with non-OPEC member Russia.

Riyadh and Moscow drew a line under their dispute earlier this month when they and other countries agreed to cut output by almost 10 million barrels a day to boost virus-hit markets.

But prices have continued to fall as analysts say the cuts are not enough – and US crude's collapse Monday was triggered by worries that key storage facilities in Cushing, Oklahoma, are under pressure.

In a sign of the level of oversupply, the US Energy Information Administration said crude inventories in the world's biggest economy rose by 19.25 million barrels last week.

Trifecta Consultants analyst Sukrit Vijayakar said US refineries were not processing the crude supplies fast enough, resulting in fewer buyers and storage facilities filling up.

There are also plenty of supplies from the Middle East with no buyers as "freight costs are high", he told AFP.

"I think we will see a test of the 1998 lows at $11 sooner rather than later," OANDA senior market analyst Jeffrey Halley told AFP.

ANZ said in a note that "crude oil prices remained under pressure, as projections of weaker demand weigh on sentiment".

"Despite the OPEC+ alliance agreeing to an unprecedented cut in output, the physical market is awash with oil," it said, referring to the Organization of the Petroleum Exporting Countries and non-OPEC partners.

"Concern continues to mount that storage facilities in the US will run out of capacity."

Schlumberger, the largest oil field service company, said Friday it lost $7.4 billion in the first quarter. Then its CEO said the second quarter will be worse.

The company attributed the loss to writing down the value of assets by $8.5 billion because of oil prices at 20-year lows and the collapse of demand created by shutdown orders during the coronavirus pandemic.

In response, Schlumberger during the quarter laid off 1,500 people in North America, cut executive pay and put most of its remaining employees on furloughs.

The company also slashed its dividend by 75 percent, paying 12.5 cents compared with its previous payout of 50 cents. Yet CEO Olivier Le Peuch said the second quarter will be the “most uncertain and disruptive quarter that the industry has ever seen.”

Although OPEC, its allies and other oil-producing nations agreed this month to cut global oil production by 10 million barrels a day, the pandemic is reducing global demand by at least double that amount, according to some estimates.

As a result, Schlumberger isn’t offering specific guidance to investors on the company’s second-quarter financial performance.

“First, it is very difficult to model or predict the frequency or magnitude of the COVID-19 disruption on field operations,” Le Peuch said. “Second, it is too early to judge the impact of the recent OPEC+ decision on the level of international activity as well as its repercussion on storage levels globally and related risks of production shut-ins.”