Traders scrambled to make sure they were not lumbered with unwanted barrels of US oil on Monday, sending prices down to their lowest point since the 1980s.
The FTSE 100 closed the day up by 25.87, or 0.45% to 5812.83, but all eyes were firmly on the other side of the pond.
With contracts for May’s US oil deliveries due to expire on Tuesday, investors struggled to find buyers for their barrels.
The price of West Texas Intermediate plummeted 44% to 10.28 US dollars per barrel, levels not seen since 1986.
Traders normally play a game of pass the parcel with oil contracts, which are promises to deliver a barrel of oil at a certain date. Whoever is left with the contract as the expiry date hits has to take delivery of the oil.
Usually it is not a problem to find a buyer who wants the physical oil, however with storage sites rapidly filling up around the world and consumer demand plummeting, traders have had to slash their prices, or face being left with unwanted oil.
After our action, @Metro_Bank has committed to pay more than £10.5m in refunds.
This is after failing to inform customers they would be charged for entering unarranged overdrafts.
— Competition & Markets Authority (@CMAgovUK) April 20, 2020
“The WTI May contract is due to expire tomorrow, and it appears the selling pressure is ramping up as dealers scramble to get out of the contract,” David Madden, an analyst at CMC Markets, said.
While the US standard’s May contract collapsed, international standard Brent dropped by around 6% to 26.51 US dollars per barrel.
Although European markets were sluggish, they seem to have largely shrugged off the impact of the oil troubles in the US.
Oil majors, normally the first to suffer when oil prices plunge, were rather untouched. BP ended the day down 0.4%, while Shell closed 2% lower.
Just after markets closed in the UK, a pound cost 1.2473 dollars, down 0.2%, and 1.1465 euros, a 0.3% reduction.
Top European markets largely mirrored the performance in the UK, with the Dax in Germany gaining half a percent, and the Paris-based Cac 40 rising 0.65%.
In company news, the shares in AB Foods remained broadly flat as its subsidiary Primark agreed to pay suppliers another £370 million to cover stock currently in production or yet to be delivered.
The Competition and Markets Authority revealed that Metro Bank would repay customers more than £11 million in overdraft fees and interest, after it failed to properly warn account holders that they were going into their overdraft and would be charged. Shares shrugged off the news, rising 2%.
There was more action in the share price of furniture retailer DFS, which rose by 11% as management revealed it is in the “advanced stages” of negotiations over a refinancing deal and it also reported a surge in online orders.
It said it is in talks over an additional £60 million to £70 million debt facility as it looks to bolster its finances in the face of coronavirus.
The biggest risers on the FTSE 100 were Unilever, up 188p to 4,303p, Rentokil, up 19.6p to 455p, Ashtead, up 71.5p to 1,838.5p, Reckitt Benckiser, up 252p to 6,500p, and Next, up 150p to 4,585p.
The biggest fallers on the FTSE 100 were Meggitt, down 15.8p to 259.9p, Barratt Developments, down 24.6p to 461.1p, Taylor Wimpey, down 6.4p to 129.95p, EasyJet, down 26.6p to 612.2p, and IAG, down 7.7p to 225.7p.