Oil prices plunged Tuesday again amid concern about tanking crude storage capacity worldwide and fears that fuel demand may recover slowly once nations ease bans imposed on economic and social activity to combat the coronavirus pandemic.
U.S. West Texas Intermediate (WTI) crude futures dropped to as low as $10.64/barrel Tuesday and had been off 13% ($1.66), at $11.12/barrel. WTI plunged 25% Monday.
Brent crude futures dropped to a low of $18.85 and had been last down 4.5% (90 cents), at $19.09/barrel. The benchmark slid 6.8% Monday, and the contract for June delivery expires on April 30.
Strategists stated part of the WTI drop 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 avoid huge losses like last week, when WTI plummeted below zero.
The U.S. Oil Fund, the most important oil exchange product, stated it could further flip its holdings into later-dated contracts.
Even with the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia having agreed on record output cuts of nearly 10 million barrels per day (BPD) from May 1, that quantity isn’t nearly sufficient to offset a drop in demand of around 30 million BPD because of COVID-19 restrictions.