Oil tank train cars sit idle yesterday in Chicago. The world is awash in oil and there’s little demand for it. That explains this week’s strange and unprecedented action in the market for crude oil futures contracts.

NEW YORK—A barrel of oil now costs less than a cheap bottle of wine.

Oil prices crumpled even further yesterday, and US stocks sank to their worst loss in weeks as worries swept markets worldwide about the economic carnage caused by the coronavirus pandemic.

US benchmark crude was trading as low as $6.50 a barrel yesterday, more than 80 per cent lower than the start of the year.

The dizzying drop reflected stark suffering in the global economy that has left vastly diminished demand for oil.

There’s little mystery around the sharp drop-off: Efforts to limit the spread of the coronavirus have major cities around the world on lockdown, air travel has been seriously curtailed and millions of people are working from home, leading to far fewer commuters on the roads.

The market’s spotlight was again on oil, where prices have plummeted because very few people are flying or driving and factories have shut amid widespread stay-at-home orders.

Global demand is set to drop to levels last seen in the mid-1990s.

At the same time, oil producers can’t slow their production fast enough and all the extra crude means storage tanks are quickly running out of room.

The cost for a barrel of US oil to be delivered in June plunged 43 per cent to $11.57. That’s the part of the market that oil traders are focused on and trading most actively.

For oil to be delivered next month, which is when storage tanks could top out, the cost of a barrel stood at $10.01.

A day earlier, it fell below zero for the first time, meaning traders paid others to take oil off their hands to get rid of the headache of finding where to store it.

Analysts consider prices for US oil to be delivered in June and later as closer to the “true” price of crude, along with prices for international oils.

They did not drop below zero, in part because the storage issues aren’t as pressing for them. But they also slid yesterday on the same concern: A global economy incapacitated by the virus outbreak doesn’t need to burn as much fuel.

Brent crude, the international standard, for delivery in June lost 24.4 per cent to $19.33 per barrel.

“I don’t think there’s enough time even before the June contract to solve the storage capacity issue, so you see the June contract coming down sharply,” said David Joy, chief market strategist at Ameriprise Financial. (AP)