The price of uncertainty: Oil futures prices drop below $0
Demand for oil is at its lowest since the mid-1990s, as fewer people drive or fly, resulting in an oversupply. "At a minimum, oil prices will be the last asset class to recover from lockdown," said one commentator.
The oil market plunged further on Tuesday over concerns of a collapse in demand as the pandemic leaves factories, cars, and airplanes idled around the world.
The extreme volatility in energy markets highlights investors' worries about the duration of the coronavirus outbreak and its impact on the economy. That is in turn weighing on financial markets more broadly, including stocks.
The benchmark U.S. oil contract was down $4.78 at just $15.65 per barrel on Tuesday, having traded as low as $11.79 a barrel at one point.
The drop comes a day after the price of oil futures fell below zero on Monday, partly due to technical factors as traders shifted from one futures contract to another. The U.S. oil contract for delivery in May settled at negative $37.63 per barrel on Monday, an indication that investors don't want to be left holding oil at a time when storage facilities are almost full and demand is at its lowest since the mid-1990s.
The tumult in the oil market reflects uncertainty over where the world economy will head as governments begin to loosen controls imposed to contain the coronavirus.
"We could merely be in the eye of the hurricane as the epicenters of its rage remain centered around demand devastation and crude oil oversupply," Stephen Innes of AxiCorp. said in a commentary.
"At a minimum, oil prices will be the last asset class to recover from lockdown" and only when travel restrictions are lifted, he said.
Brent crude, the international standard, as fallen from $45.72 to $19.85 in recent weeks.
"The historic drop in WTI prices is an indication of the downward pressure which many other crude oil grades could face, given the oversupply situation," Sushant Gupta of Wood Mackenzie said in a report.
The volatility in energy markets unsettled stock markets as well. With Germany's DAX stock index losing 3.3% to 10,319 and the CAC 40 in France shedding 3.2% to 4,384. Britain's FTSE 100 declined 2.6% to 5,664.
Wall Street looked set for losses, with the future contract for the S&P 500 down 2.1%, while the contract for the Dow industrials lost 2.5%.
While share prices have gradually stabilized after wild swings earlier this year, uncertainty over growing numbers of coronavirus cases in Japan and in some Southeast Asian countries has left investors wary about new waves of infections.
Unconfirmed reports Tuesday that North Korean leader Kim Jong Un was in fragile condition after surgery added to the jitters. But South Korea's government said Mr. Kim appeared to be handling state affairs as usual.
Tokyo's Nikkei 225 stock index fell 2% Tuesday to 19,280.78 while the Hang Seng index in Hong Kong lost 2.2% to 23,793.55. South Korea's Kospi slipped 1%, to 1,879.38.
Australia's S&P/ASX 200 fell 2.5% to 5,221.30 and the Shanghai Composite index gave up 0.9% to 2,827.01.
In a sign of continued caution in the market, Treasury yields remained extremely low. The yield on the 10-year Treasury slipped to 0.57% from 0.62% late Monday.
In currency trading, the dollar edged down to 107.40 Japanese yen from 107.63 on Monday. The euro fell to $1.0831 from $1.0862.
This story was reported by The Associated Press.
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