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.
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.