Stocks rise as oil prices rebound from historic lows

Stocks rise as oil prices rebound from historic lows
© UPI Photo

Stocks bounced back from two days of steady losses Wednesday as oil prices rebounded from a historic dip into negative territory.

The Dow Jones Industrial Average opened with a gain of 460 points Wednesday in early trading, rising 2 percent after falling roughly 5 percent through Monday and Tuesday. The S&P 500 rose 1.9 percent and the Nasdaq composite rose 2.1 percent.

Stocks sank throughout the beginning of the week as oil prices plunged into record lows amid a massive oversupply of oil driven by the coronavirus epidemic. The price of a barrel of West Texas Intermediate crude, the benchmark for U.S. oil, for May delivery dipped as low as negative $30 on Monday, the last day it could be purchased under that contract. 

ADVERTISEMENT

The price for a barrel of crude for June delivery on Wednesday rebounded to close to $14, soothing some concerns about the economic impact of oil market turmoil.

Oil producers have scrambled to store a massive surplus of oil as the coronavirus pandemic drastically suppresses global demand for fuel. Steep declines in automobile and air travel have left petroleum companies with more oil than warehouses can store, pushing prices so low Monday that producers were effectively paying buyers to take excess oil off of their hands.

While this week's record-breaking decline in oil prices was largely due to the deadline to secure an order for May, prolonged trouble for the petroleum industry could pose significant economic and financial challenges for the U.S.

A boom in U.S. oil production over the past decade has fueled economic growth in Texas in other states that have become increasingly reliant on the country's recent emergence as a net-exporter of oil. While past dips in oil prices meant Americans would benefit through cheaper gasoline, industry turmoil now could spread throughout the financial system as highly indebted oil companies face bankruptcies.

President TrumpDonald John TrumpTrump suggests some states may 'pay nothing' as part of unemployment plan Trump denies White House asked about adding him to Mount Rushmore Trump, US face pivotal UN vote on Iran MORE pledged Tuesday that the federal government would step in to aid the oil industry if a continued decline in prices threatened to derail it.