Oil prices slumped Monday on indicators that global oil storage is filling rapidly, raising concerns that output reductions won’t be fast enough to fully offset the slump in demand from the coronavirus pandemic.
U.S. oil futures headed for losses on fears that storage at Cushing, Oklahoma, could reach full capability soon. U.S. crude inventories surged to 518.6 million barrels in the week to April 17, near an all-time record of 535 million barrels set back in 2017.
U.S. West Texas Intermediate June futures dropped $1.49, or 8.8%, to $15.45/barrel, while Brent crude was down 44 cents, or 2.1%, at $21.00/barrel.
Oil futures highlighted their third week of losses last week – and have dropped for eight of the past nine – with Brent ending down 24% and WTI off around 7%.
Retail investors had been caught off guard last week when the May WTI contract slumped into negative territory for the first time ever two days before expiry as financial traders scrambled to avoid having to take delivery of oil.
The June WTI contract’s price plunge may have been caused by investors moving to later months to avoid a similar fate, stated Tony Nunan, a senior risk manager at Mitsubishi in Tokyo.
Cushing, the delivery point for WTI, was 70% full as of mid-April, though traders stated all available area was already leased out.