SINGAPORE — Oil prices rebounded Wednesday but gains were capped due to concerns about a collapse in demand due to the coronavirus pandemic and storage capacity running low.

US benchmark West Texas Intermediate (WTI) for June delivery was up 8.35 per cent at US$13.37 a barrel in early Asian trade.

It had plunged by more than 21 percent at one point Tuesday after a major US exchange-traded fund (ETF) started selling its short-term contracts of the commodity.

Brent crude, the international benchmark, was trading 1.81 per cent higher at $20.83 a barrel.

Traders "are bargain hunting after a couple of days of massive sell-offs", OANDA senior market analyst Jeffrey Halley said.

ANZ Bank said in a note that the market was hit by volatility Tuesday "as ETFs and index funds moved contract positions amid renewed concerns of negative prices" in short-term holdings.

The American ETF – the United States Oil Fund – had sold its contracts due to expire in June to move into longer-dated holdings amid fears about storage space running out in the short term.

Following the US ETF's move, Standard & Poor's also told clients to sell their stakes in the June contracts and move them into July, ANZ said.

S&P operates the GSCI commodity index, which is tracked by pension funds and other big investors.

Other indices, including the Bloomberg Commodity Index, took similar steps.

Oil prices have fallen to historic lows this month, with WTI crashing deep below zero for the first time as governments worldwide shut down businesses and air travel grinds to a halt due to the virus.

An agreement by top crude-producing nations to cut output by 10 million barrels a day from May 1 has done little to calm the market.

The production cuts "will probably take weeks to show up in the physical market, hence we are still stuck with the inventories issues that will continue to curb any semblance of bullish appetite", said AxiCorp global market strategist Stephen Innes. — AFP