HONG KONG: Oil resumed its painful retreat on Wednesday, extending a rout that has torn through energy markets, though stock exchanges in Asia and Europe were mixed following a two-day sell-off.
With demand virtually non-existent owing to virus lockdowns, and production still high despite storage at bursting point, crude markets have been sent into freefall with West Texas Intermediate (WTI) for May delivery diving to minus $40 on Monday.
Focus has turned to the June contract, which started on Wednesday on fine form following news that top producers had held talks - but it plunged into the red in the afternoon, having lost almost half its value on Tuesday, when Brent collapsed by a fifth.
WTI surged 20% before changing course to sit more than seven percent down later, while Brent was off more than 16%.
The crisis in the oil market caused by coronavirus was compounded by a price war between Russia and Saudi Arabia, but while they drew a line under the row and joined other key producers in slashing output by 10 million barrels a day, that has not been enough.
Crude's rout "merely reflects the underlying theme that there is no demand for physical oil, and there is nowhere to store it", said AxiCorp's Stephen Innes.
"Disappointment following the new (oil cut) agreement continues to resonate, and responding to that outcry could be the one thing that turns the oil price around in the near term, absent evidence of demand recovery."
Analysts said the morning bounce was driven by news that members of OPEC, as well as some allies in the OPEC+ grouping, held a teleconference on Tuesday - but gloom soon returned.
Equity markets, buoyed in recent weeks by trillions of dollars of stimulus and signs of a slowdown in the rate of virus infection and death in some countries -- and moves to slowly ease lockdown measures in a number of nations - are beginning to feel the spillover from the crude collapse.
Investors fear the rout could compound an expected deep global economic downturn.
Innes added that the oil crisis "has negative connotations for other areas of the market, most notably banks, given their high exposure to US shale producers".
Asian markets have struggled this week, though there were some recoveries on Wednesday.
Tokyo ended down 0.7% while Singapore and Bangkok each shed 0.9% and Wellington retreated more than one per cent. Manila also fell and Sydney was marginally lower.
However, Hong Kong, Shanghai, Mumbai, Seoul and Taipei were all up along with Jakarta.
In early trade, London, Paris and Frankfurt all rallied.
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