Oil clawed back some losses as Chinese manufacturing data beat expectations, but futures were still heading for the worst quarter on record as the physical market showed further signs of collapse. Futures in New York were higher on Tuesday but crude is still down 65% since the end of December. While Brent and West Texas Intermediate futures are holding up above $20 a barrel, in the world of physical crude, where traders buy and sell actual barrels, prices continue to be in freefall. The price difference between where the paper market trades and the physical market has widened to reach multi-decade highs in some cases, suggesting that financial flows are supporting the futures market.

With demand weakening by the day and producers refusing to cut output, Dated Brent, the benchmark to price about two-thirds of the world’s actual barrels in the physical market, was assessed at $17.79 a barrel on Monday, well below where Brent futures traded. In North America, WTI in Midland, the capital of the Permian region, traded at just $10.50 a barrel, and multiple key grades, including Canadian crude and Bakken crude from North Dakota, traded below $5 a barrel.