Shares skid after oil prices dip into negative territory

Asian shares skidded on Tuesday after U.S. oil futures plunged below zero with stor for crude nearly full as demand collapses due to pandemic.

Shares fell in Tokyo, Hong Kong and Shanghai and New York stock futures retreated after S&P 500 sank 1.8% overnight, giving up some big gains from last week.

In a stunning development, cost to have a barrel of U.S. crude delivered in May plummeted to negative $37.63. It was at roughly $60 at start of year.

Traders are still paying more than $20 for a barrel of U.S. oil to be delivered in June, which analysts consider to be closer to “true” price of oil. Crude to be delivered next month, meanwhile, faces a stark problem: traders are running out of places to keep it, as factories, automobiles and airplanes sit idled around world.

“We could merely be in eye of hurricane as epicenters of its r remain centered around demand devastation and crude oil oversupply," Stephen Innes of AxiCorp. said in a commentary.

“At a minimum, oil prices will be last asset class to recover from lockdown. End transport demand will only occur in final sts of reopening when border crossing is allowed, and travel restrictions get lifted," he said.

Tanks at a key energy hub in Oklahoma could hit ir limits within three weeks, according to Chris Midgley, head of analytics at S&P Global Platts. So traders are willing to pay ors to take that oil for delivery in May off ir hands, so long as y also handle figuring out where to keep it.

“Almost by definition, crude oil has never fallen more than 100%, which is what happened today,” said Dave Ernsberger, global head of pricing and market insight at S&P Global Platts.

“I don’t think any of us can really believe what we saw today,” he said. “This kind of rewrites ecomics of oil trading.”

Few traders are buying and selling U.S. oil to be delivered in May. When trading contracts for it expire on Tuesday, earliest delivery y’ll be able to buy is for June.

Brent crude, international standard, fell nearly 9% on Monday to $25.57 per barrel.

On Tuesday, U.S. crude for June delivery rose 99 cents to $21.42 per barrel in electronic trading on New York Mercantile Exchange. Brent crude, standard for international oil pricing, dropped 19 cents to $25.38.

“ historic drop in WTI prices is an indication of downward pressure which many or crude oil grades could face, given oversupply situation," Sushant Gupta of Wood Mackenzie said in a report.

On bright side, given very low prices right w, “It also provides an opportunity for large consuming nations in Asia such as China and India to expedite filling up ir petroleum reserves."

Gupta said India, for example, still has up to 13 million barrels of spare capacity out of a total of 39 million barrels of stor capacity.

Tokyo’s Nikkei 225 fell 1.9% by midday Tuesday to 19,292.69 while Hang Seng index in Hong Kong lost 2.3% to 23,772.36. South Korea’s Kospi slipped 1.5%, to 1,869.50.

Australia's S&P/ASX 200 fell 1.8% to 5,358.40 and Shanghai Composite index gave up 1.4% to 2,813.95.

In a sign of continued caution in market, Treasury yields remained extremely low. yield on 10-year Treasury slipped to 0.60% from 0.62% late Monday.

In currency trading, dollar weakened to 107.51 Japanese yen from 107.63 on Monday. euro fell to $1.0834 from $1.0862.

Monday’s plunge in oil sent energy stocks in S&P 500 to a 3.7% loss, latest in a dismal 2020 that has caused ir prices to nearly halve.

Halliburton reported a stronger first quarter profit than expected but said pandemic has created so much turmoil in industry that it “cant reasonably estimate” how long hit to demand will last.

S&P 500 fell 51.40 points to 2,823.16. Dow Jones Industrial Aver lost 2.4% to 23,650.44, and Nasdaq dropped 1%, to 8,560.73.

Gains from companies that are winners in new stay-at-home ecomy helped limit market’s losses. Netflix jumped 3.4% to set ar record as people while away hours and days shut in at home. Amazon added 0.8%.

Stocks have been on a general urd swing recently, buoyed by promises of massive aid for ecomy and markets by Federal Reserve and U.S. government.

More recently, countries around world have tentatively eased up on business-shutdown restrictions meant to slow spread of virus, which has killed more than 170,000 people and infected more than 2.4 million.

Health experts warn pandemic is far from over and new flareups could ignite if governments allow a premature rush to ”rmal” life. Many analysts also say some of recent rally for stocks is based on overly optimistic expectations for a fast ecomic rebound once shutdowns end.

“re’s still uncertainty surrounding reopening of ecomy,” said Julian Emanuel, chief equity and derivatives strategist at BTIG. “Come fall, are we going to be back on airplanes? Are we going to go out and eat?”