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GLOBAL MARKETS-Crude claws back into positive territory but historic crash spooks investors

Published 21/04/2020, 12:28 pm
© Reuters.
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* U.S. crude climbs back to $1.76, Brent at $25.78

* Spooked investors sell shares, seek dollars

* Nikkei -1%, ASX -0.5%

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Tom Westbrook and Katanga Johnson

SINGAPORE/WASHINGTON, April 21 (Reuters) - U.S. crude oil bounced back into positive territory on Tuesday, after a historic plunge below zero that shocked investors and pushed down stock prices and Asian currencies.

Futures for May delivery of West Texas Intermediate CLc1 rose nearly $39 but were still just $1.76 a barrel, after a storage squeeze and collapsing fuel demand crushed prices to eye-popping lows. O/R

The contract expires at the end of trade on Tuesday, which is pushing investors to clear them from their books at any price, and June prices CLc2 at $22 per barrel point to some relief.

But the collapse highlighted intense disruptions globally as the coronavirus pandemic and lockdowns paralyse the world economy, and augurs badly for a swift return to growth. equity markets followed Wall Street lower. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell half a percent. Japan's Nikkei .N225 fell 1%, while bonds and the dollar held gains.

"This is clear evidence of demand destruction," said Michael McCarthy, chief strategist at broker CMC Markets in Sydney.

"It's not just relevant to energy markets, this very clear evidence of economic damage...it's not a matter of just turning everything back on and jumping back into action."

Even besides the economic signal, the plunge puts fresh and unbearable pressure on producers and has investors worrying about a credit crunch if heavily indebted energy firms collapse or a systemic funding crisis if traders are affected.

May futures settled at minus $37.63 a barrel on Monday, a 306% daily drop, driven by the rapid filling of the United States' main storage hub at Cushing, Oklahoma - the delivery point for West Texas crude.

"The price action was scary because you've got folks wanting to pay other people to take physical delivery of an asset they don't want to own," said Kyle Rodda, market analyst at IG Markets in Melbourne.

"It points to the fact that supply and demand has been destroyed...the issue will be that in a month's time will we be staring down the barrel of the same thing?"

North Sea Brent LCOc1 , the international benchmark and far more easily seaborne, was at $26.25, up 2% on the day.

AWASH IN OIL

The unprecedented dislocations in oil markets come as hopes for a swift recovery from the coronavirus crisis are waning as governments take cautious paths to restarting their economies.

If lessons can be drawn from China, industrial production can be switched back on relatively quickly once anti-virus measures are eased, but consumption will take longer to revive if social distancing and other movement restrictions continue, Oxford Economics said in a note to clients.

In currency markets, the safe-haven dollar gained on riskier majors such as the Australian and New Zealand dollars for a second day and bonds extended Monday's rally. FRX/

The dollar stood at $0.6306 per Australian dollar AUD=D3 and $0.6003 per kiwi NZD=D3 , while the oil-linked Canadian dollar CAD=D3 and Norwegian krone NOK= recovered slightly with the bounce in oil prices.

Yields on benchmark 10-year U.S. Treasuries US10YT=RR edged lower to 0.6179%.

More than 2.41 million people have been reported to be infected by the novel coronavirus globally and 165,854 have died, according to a Reuters tally.

Debate over the pace of re-start and recovery has already spilled into the streets in the United States, the worst hit nation globally, as protests against lockdowns intensified. experts and lawmakers fear the United States could face a second and even deadlier wave of infections if the lockdowns end prematurely and other countries appear to be favouring a cautious approach.

"The COVID-induced evaporation in demand will keep the oil market under pressure," said Kerry Craig, global market strategist at J.P. Morgan Asset Management.

"Even as, or if, virus containment measures ease in the coming weeks, the world is going to be awash in oil for some time – economies may be slow to get back up and running to a pace that would warrant a strong increase in demand."

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Global assets

http://tmsnrt.rs/2jvdmXl Global currencies vs. dollar

http://tmsnrt.rs/2egbfVh Global bonds dashboard (DO NOT USE UNTIL UPDATE FOUND)

http://tmsnrt.rs/2fPTds0 Emerging markets

http://tmsnrt.rs/2ihRugV MSCI All Country Wolrd Index Market Cap

http://tmsnrt.rs/2EmTD6j U.S. crude oil's historic crash below zero IMAGE

https://reut.rs/2KmJk3e

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