Investors have also been spooked by US reports that North Korean leader Kim Jong-un had undergone cardiovascular surgery earlier this month and was in "grave danger".
West Texas Intermediate for May delivery rose to US$1.10 a barrel in early trade after diving to an unprecedented low of -US$37.63 in New York as the pandemic brings the global economy, transport and factory activity to a halt. However, it later eased back -US$4.52.
The sell-off in May futures came because the contract expires later on Tuesday, meaning traders needed to find buyers to take physical possession of the oil -- a job made near-impossible as storage becomes scarce.
However, focus is now on the June contract, which had trading volumes more than 30 times higher. That rose towards US$21 a barrel, from US$20.43 on Monday.
Brent crude, the international benchmark, was changing hands at US$22.97 for June delivery, down about 10% from Monday.
The collapse in WTI "was driven by a precipitous drop in demand caused by the market expectation that the US lockdown could continue into May", said Tai Hui at JP Morgan Asset Management.
"This isn't surprising, given flights are grounded and people are driving much less for work and leisure. If the economic reopening takes longer than expected, we could see pressure further out in the futures curve."
He added that firms were still churning out oil because stopping output "is not feasible for some producers since it could permanently damage their oil fields. Hence, giving their oil away for one month could still make sense in the long run."
Oil markets have been ravaged this year after the pandemic was compounded by a price war between Saudi Arabia and Russia.
While the two have drawn a line under the dispute and agreed with other top producers to slash output by almost 10 million barrels a day, that is not enough to offset the lack of demand.
Equity markets were deep in the red, having enjoyed a healthy couple of weeks thanks to massive stimulus measures and signs of an easing in the rate of new infections globally.
Tokyo ended two percent lower, while Hong Kong shed 2.2% and Sydney dropped 2.5% with Mumbai more than three per cent lower.
Shanghai sank 0.9% while Seoul was down a similar amount and Taipei retreated 2.8%.
Singapore, Jakarta and Bangkok lost more than one per cent, and there were also big losses in Wellington and Manila.
In early trade, London, Paris and Frankfurt tumbled.
The losses came despite signs that the virus, which has infected almost 2.5 million people and killed 170,000, is easing as global lockdowns begin to take effect, allowing some countries to slowly return to normality.
Analysts warned the drop in stocks could be an indication that the recent surge may have been too much too quick and another sell-off is possible.
Adding to pressure on markets were the reports about Kim Jong-un.
CNN cited a US official saying Washington was "monitoring intelligence" that the leader was in "grave danger after a surgery". The report did not specify what the intelligence was.
"If the North Korean news proves to be correct, the region is set for a period of uncertainty," said OANDA's Jeffrey Halley.
"Kim Jong-un was its leader for life, and he had weeded out a goodly number of potential rivals already. That leaves a nuclear-armed North Korea with giant armed forces facing a potentially messy succession process. China will also want to have its input into the process, forcefully if necessary."
The flight to safety was reflected in currency markets, where the dollar soared against high-yielding, riskier units.
The Australian and New Zealand dollars and the South Korean won were all down almost one percent, while the Russian ruble sank more than two per cent. - AFP
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