Morning Note: Oil Recovers in Asia Trading, Stocks Remain Volatile
Wall Street tumbled on Monday after U.S. crude futures turned negative for the first time ever, with traders forced to pay to unload crude as the May contract expired during a global economic slump unleashed by the coronavirus outbreak.
The S&P energy index tumbled 3.7% after the front-month May U.S. West Texas Intermediate (WTI) contract CLc1 actually turned negative, with sellers offering $37.63 a barrel to any traders willing to take it.
With billions of people staying home around the world due to the coronavirus, physical demand for crude has dried up.
Meanwhile, Oil rebounded in Asian trading, after plunging below zero for the first time in history amid rapidly filling American storage tanks, as the U.S. benchmark’s May contract entered its final trading session.
Futures in New York traded at around $1 a barrel after sinking to as low as minus $40.32 during Monday’s jaw-dropping collapse. The June contract, however, which had trading volumes more than 60 times higher, rose above $21. The spread between the two reflects the growing fear that those who take physical delivery of crude in the near future may not find any outlet or storage for those barrels as refineries curb operations.
Global markets remain highly volatile, with oil down, technically leaving hard metals to be the only option for investors, local markets may start regaining attraction to Foreign investors.
The MSCI Emerging Markets Currency Index has climbed 0.8% from this year’s low set on March 23. The gauge is still down 6.3% this year as the spread of the virus has sapped demand for higher-yielding assets.
The challenge of identifying which assets will lead the rebound from the virus turmoil is the major debating point as countries around the world achieve some success in limiting the spread of the pandemic.