Oil prices slumped again on Tuesday amid concern about dwindling crude storage capacity worldwide and fears that fuel demand may only recover slowly once countries ease curbs imposed on economic and social activity to combat the coronavirus pandemic.
US West Texas Intermediate (WTI) crude CLc1 futures fell to as low as $10.64 a barrel on Tuesday, and were off 13pc, or $1.66, at $11.12 a barrel as of 0432 GMT. WTI plunged 25 per cent on Monday.
Brent crude LCOc1 futures fell to a low of $18.85 and were last down 4.5pc, or 90 cents, at $19.09 a barrel. The benchmark slid 6.8pc on Monday, and the contract for June delivery expires on April 30.
Strategists said part of the WTI decline is due to retail investment vehicles like exchange-traded funds selling out of the front-month June contract and buying into months later in the year to avert massive losses like last week, when WTI plummeted below zero.
The United States Oil Fund LP (USO.P), the largest oil exchange product, said it would further shift its holdings into later-dated contracts.
“Looking ahead, and all attention will be on inventory numbers this week, and in particular the build we see at Cushing, the WTI delivery hub,” ING’s head of commodities strategy Warren Patterson said.
“If we see similar builds to the last few weeks, we will likely reach full capacity at Cushing over the first half of May, which should maintain bearish pressure on the market.”
Even with the Organisation of the Petroleum Exporting Countries (OPEC) and allies led by Russia having agreed record output cuts of nearly 10 million barrels per day (bpd) from May 1, that volume is not nearly enough to offset a drop in demand of around 30 million bpd due to COVID-19 restrictions.
As a result of the collapse in demand, global storage onshore is estimated to be about 85pc full as of last week, according to data from consultancy Kpler.
In a sign of the energy industry’s desperation for places to store petroleum, oil traders are resorting to hiring expensive US vessels to store gasoline or ship fuel overseas, shipping sources said.