Risk-off open: US stock futures fall 5% hitting ‘limit down’, oil drops to test below $21bbls WTI

• In a risk-off open, the price of oil has dropped below the $21 handle and US stock futures are limit down.
• Geopolitical incentives may keep the oil price war ongoing for some time still.

US stock futures have plunged at the open, with the Dow indicated to tank 900+ points tomorrow. The price of oil is also moving lower, down over 9% in WTI. Markets are waiting for Washington to agree to an economic stimulus and rescue plan to combat the ‘invisible enemy’ which is COVID-19, as US President Donald Trump has explained in a COVID-19 presser today:

The Dow Jones Industrial Average futures fell more than 900 points, or 5%, to hit their “limit down” level. S&P 500 and Nasdaq 100 futures were also down around 5%. The price of oil fell to a low of $20.84 from $23.40.

Reports of talks between OPEC and the US shale industry did little to ease the selling in the crude oil market last Friday as the market sees little hope of any coordinated approach on supply within OPEC+. 

“With nearly 10% of the world’s oil demand coming from the auto sector in the US, the forced lockdown in several US cities could have a significant impact on gasoline consumption. But with the normal circuit breaker of curtailed supply in effective, the downside to prices remains significant,” analysts at ANZ Bank explained. 

Oil to drop below $20

Meanwhile, analysts at TD Securities see oil falling below $20. “Given weaker and weaker demand expectations and surging OPEC+ production levels, crude oil could well drop below $20/b in the not-too-distant future, as surging supply overwhelms shrinking demand and straining storage capacity,” the analysts argued, adding, “trend followers remain well-positioned for the sharp decline in prices, but we also see a faint light at the end of the tunnel, as incentives are high for an eventual meeting to take place that could translate into a supply curtailment agreement. That being said, geopolitical incentives may keep the price war ongoing for some time still.”

WTI levels