US crude prices bounced back into positive territory on Tuesday, a day after crashing below $0.00 for the first time owing to crippled demand and a storage glut, while the commodity rout sent Asian equities sharply lower.
West Texas Intermediate (WTI) for May delivery was changing hands at $1.10 a barrel after diving to an unprecedented low of -$37.63 in New York as the pandemic brings the global economy, transport and factory activity to a halt.
The sell-off in May futures came because the contract expires later Tuesday, meaning traders needed to find buyers to take physical possession of the oil — a job made near-impossible as storage becomes scarce.
However, focus is now on the June contract, which had trading volumes more than 30 times higher. That rose towards $21 a barrel, from $20.43 on Monday.
Brent crude, the international benchmark, was changing hands at $25.75 for June delivery.
The collapse in WTI "was driven by a precipitous drop in demand caused by the market expectation that the US lockdown could continue into May", said Tai Hui at JP Morgan Asset Management.
"This isn't surprising, given flights are grounded and people are driving much less for work and leisure. If the economic reopening takes longer than expected, we could see pressure further out in the futures curve."
He added that firms were still churning out oil because stopping output "is not feasible for some producers since it could permanently damage their oil fields. Hence, giving their oil away for one month could still make sense in the long run".
Oil markets have been ravaged this year after the pandemic was compounded by a price war between Saudi Arabia and Russia. While the two have drawn a line under the dispute and agreed with other top producers to slash output by almost 10 million barrels a day, that is not enough to offset the lack of demand.
Equity markets were deep in the red, having enjoyed a healthy couple of weeks thanks to massive stimulus measures and signs of an easing in the rate of new infections globally.
Tokyo ended the morning 1.6 per cent lower, while Hong Kong, Sydney, Seoul, Taipei and Manila were also more than one per cent lower.
Shanghai and Singapore both shed 0.8 per cent, and there were also losses in Jakarta and Wellington.
The losses came despite signs that the virus, which has infected almost 2.5 million people and killed 170,000, is easing as global lockdowns begin to take effect, allowing some countries to slowly return to normality.
Analysts warned the drop in stocks could be an indication that the recent surge may have been too much too quick and another sell-off is possible.
The flight to safety was reflected in currency markets, where the dollar soared against high-yielding, riskier units. The South Korean won, Australian and New Zealand dollars and Russian ruble were all down more than one per cent, while the Indonesian rupiah sank 0.9 per cent.