Crude oil futures plunged Monday, with U.S. futures touching levels not seen since 1999, extending weakness on the back of tanking demand and concerns that U.S. storage facilities will soon start flooding amid the coronavirus pandemic.
The oil market has been under pressure on account of a spate of reports on weak fuel consumption and dull estimates from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).
The quantity of oil held in U.S. storage, especially at Cushing, Oklahoma, the delivery level for the U.S. West Texas Intermediate (WTI) contract, is growing as refiners throttle back activity attributable to slumping demand.
The front-month May WTI contract was down $2.62, or 14%, to $15.65 a barrel by 0142GMT. At one level, the contract had fallen as a lot as 21% to hit a low of $14.47 per barrel, the lowest since March 1999.
That agreement is expiring on Tuesday, and the June contract, which is turning into extra actively traded, tanked $1.28, or 5.1%, to $23.75 a barrel. Brent was also weaker, down 21 cents to $27.87 per barrel.
The drop in crude oil costs reflects a glut on the main U.S. storage facilities at Cushing and a big plunge in demand, stated Michael McCarthy, chief market analyst at CMC Markets in Sydney.
Production cuts from OPEC and its allies reminiscent of Russia can even kick from May. The group has agreed to scale down oil production by 9.7 million BPD to stem a growing supply glut after stay-at-residence orders and business furloughs to contain the COVID-19 pandemic that has killed over 164,000 people globally sap gasoline demand.