New York—US oil prices rebounded above zero Tuesday, a day after futures ended in negative territory for the first time as a coronavirus-triggered collapse in demand leaves the world awash in crude.
US benchmark West Texas Intermediate for May delivery was changing hands at $1.10 a barrel after closing at -$37.63 in New York.
The May futures contract expires Tuesday, meaning traders who buy and sell the commodity for profit needed to find someone to take physical possession of the oil. But with the glut in markets and storage facilities full, buyers have been scarce.
On Monday, US oil prices crashed to unprecedented lows, as futures in New York ended in negative territory for the first time amid a devastating supply glut that has forced traders to pay others to take the crude off their hands.
With space to store oil scarce, US benchmark West Texas Intermediate for May delivery closed at -$37.63 a barrel.
"It's a contract for something that nobody wants to buy," said Matt Smith of ClipperData.
Addressing reporters after the market close, President Donald Trump reiterated his promise to fill up the Strategic Petroleum Reserve, saying the US would add as much as 75 million barrels of crude.
"That would be the first time in a long time that it has been topped out. We get it for the right price," Trump said.
Later in the briefing, he specified that he would only buy that amount if Congress authorized the funding—or if the federal government could rent storage space to third parties for a fee.
As of April 17, the SPR contained 635 million barrels of its current authorized limit of 713.5 million barrels.
The cratering oil prices prompted more selling on Wall Street, which was slowly creeping back up after the coronavirus pandemic battered the major indices.
US stocks opened lower and stayed that way all day, with the Dow petering out to post a 2.4 percent decline.
Traders are now more focused on the contract for June delivery, which had trading volumes more than 30 times higher. That also rebounded Tuesday, rising to above $21 a barrel following a close of $20.43 a barrel in New York.
Brent crude, the international benchmark, was changing hands at $25.61 a barrel for June delivery, up 0.15 percent.
The crisis was worsened by a price war between Saudi Arabia and Russia. Riyadh and Moscow drew a line under the dispute and, along with other top producers, struck a deal to cut output by almost 10 million barrels a day earlier this month.
But prices have continued to fall as analysts say the cuts are not enough, and as storage facilities reach capacity.
US crude's collapse Monday was triggered in part by the closely monitored WTI storage facility at Cushing, Oklahoma filling up, as well as traders closing out their positions before the expiry of the May contract.
"The WTI May futures contract is due to expire on Tuesday, forcing any holders of that contract to accept physical delivery," ANZ Bank said in a note.
"With storage facilities filling up fast, particularly at the WTI pricing point, Cushing, there are fears that there will be nowhere to store it."
Michael McCarthy, chief market strategist at CMC Markets, added that "the prospect of having to pay to sell crude oil provided a brutal reminder of the current unusual economic conditions."
A deal announced last week between OPEC and independent producers to cut output by about 10 million barrels per day starting in May appears not to have been enough to buoy prices, while the closely-monitored storage capacity at Cushing, Oklahoma was almost full as of Monday morning.
"It's a dump at all cost as no one… wants delivery of oil, with Cushing storage facilities filling by the minute," AxiCorp's Stephen Innes said.
"It hasn't taken long for the market to recognize that the OPEC+ deal will not, in its present form, be enough to balance oil markets."
Still, Smith noted Monday's negative price only affects oil deliveries due Tuesday.
US oil futures for delivery in June also fell sharply, dropping 18 percent, but finished at $20.43 a barrel.
The European benchmark contract, London Brent North Sea oil for June delivery, ended down nine percent at $25.57 a barrel.
"This moment is, of course, historical and could not better illustrate the price utopia that the market has been in since March, when the full scale of the oversupply problem started to become evident," said Rystad Energy's Oil Markets Analyst Louise Dickson.
Meanwhile, most European stock markets ended the day higher as governments start to consider how and when to ease the lockdowns that have crippled the global economy.
Italy, Spain, France and Britain reported drops in daily death tolls and slowing infection rates, while Germany began allowing some shops to reopen and Norway restarted nurseries.
