After hitting their lowest level since 1998, US oil prices crashed below $11 per barrel on Monday as the coronavirus pandemic cripples global energy demand, sparking concerns that storage facilities will soon be full.
US West Texas Intermediate (WTI) crude for May delivery tumbled over 40 percent to $10.72 per barrel and was on track to suffer its worst trading day on record.
Meanwhile the most-active June contract for WTI, which expires on May 19, fell more than 11 percent to $22.07 per barrel. The gap between the two consecutive contracts – known as the front month and second month – is believed to be the widest in history.
As the May contract crude expires on Tuesday, the imminent expiry added pressure on the prices which have been already falling amid a lack of demand that is estimated to have dropped around 30 percent worldwide.
The drop also comes amid news that a record amount of oil – some 160 million barrels – is being held on tankers at sea, while traders are struggling to find a place in onshore storages.
Meanwhile the volumes held in US storage are rising day by day. For example, America’s key storage hub, the Cushing delivery point, has nearly doubled the amount of oil since the end of February. It now has almost 55 million barrels of oil, while its working storage capacity stood at 76 million last year, according to the US Energy Information Administration (EIA).
Earlier this month, major oil exporting states – the Organization of the Petroleum Exporting Countries and producers led by Russia – agreed to slash global output by nearly 10 million barrels a day. While the historic deal comes into effect in May, there are fears that oil prices could remain low due to April’s supply glut.
