Two state-owned Chinese banks have suspended open positions for crude oil trading products after the commodity experienced an unprecedented crash to reach negative price levels.
Bank of Communications suspended open position on crude oil trading products starting on Thursday due to «current pricing and liquidity risks» in the market, according to a statement from the bank.
This follows one day after fellow big four state-owned lender Bank of China also suspended clients from opening new positions in its «Yuanyou Bao» product based on international crude oil futures. The bank had contacted the Chicago Mercantile Exchange and other market participants for verification after claiming to flag exchange system worries when oil prices fell below zero.
Negative Prices
The double whammy of a coronavirus pandemic and a Saudi-Russia oil war led crude oil prices to plummet to an unheard of $37 below zero. An understandably pessimistic demand outlook has outweighed eventual potential income generated leading the market force sellers to pay buyers to take inventory.
And the troubles may not be over yet.
Mizuho Securities managing director Paul Sankey wrote that prices could «quite possibly» plunge further to negative $100 per barrel, adding that «oil is that it is difficult to handle, volatile, potentially polluting, and actually useless without a refinery».
