Crude Bounce Back Into Positive Territory

U.S. crude oil rebounded into positive territory Tuesday, after a historic plunge below zero that spooked investors and weighed on stock prices and Asian currencies.

Crude Bounce Back Into Positive Territory

Futures for May supply of West Texas Intermediate surged nearly $39 but have been still just $1.76/barrel, after a storage shortage and slumping fuel demand beat prices to eye-popping lows.

The contract expires at the end of Tuesday, which is driving investors to clear them from their books at any price, and June prices at $22/barrel point to some relief.

But the collapse marked intense disruptions around the world as the coronavirus pandemic and lockdowns plague the world economy, and augurs badly for a swift return to growth.

Asian equity markets followed Wall Street lower. MSCI’s broadest index of Asia-Pacific shares outside Japan fell half a percent. Japan’s Nikkei plunged 1%, while bonds and the dollar held yields.

Even besides the financial signal, the plunge puts recent and unbearable stress on producers and has investors worrying about a credit crunch if heavily indebted energy companies collapse or a systemic funding crisis if traders are affected.

May futures closed at minus $37.63/barrel Monday, a 306% day by day drop, driven by the rapid filling of the U.S.’ main storage center at Cushing, Oklahoma – the delivery point for West Texas crude.