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U.S. oil futures on Monday were collapsing anew to start a potentially punishing stretch, putting the commodity on track to mark its lowest settlement since around 1999 as reignited concerns about a scarcity of places to put an overflow of crude weighed on the beleaguered asset.
“The market knows that the storage problem remains and we are on a calculated path to reach tank tops in weeks,” wrote Bjornar Tonhaugen, head of oil markets at Rystad Energy in a daily research note. Prices can only decline when producers have nowhere to store oil in the near term, he wrote.
June West Texas Intermediate crude CLM20, -23.84%, the U.S. benchmark, lost $4.20, or 25%, to trade at $12.69 a barrel, following a 32.3% decline for the week—its biggest such decline on record—for the commodity and a landmark plunge in the now-defunct May contract, which last Monday ended in negative territory for the first time in the history of the energy complex.
June Brent crude BRNM20, -6.90%, the international benchmark, headed $1.55, or 6.3%, at $23.26 a barrel, following its 23.7% weekly drop.
A decline for both contracts would snap a three-session win streak to end last week’s turbulent trading.
The fall for oil comes as a pact by the Organization of the Petroleum Exporting Countries has failed to quell rampant worries about too much supply and a shrinking number of facilities to store the asset. Higher prices for contracts for oil in later months also has consequently encouraged further storing of crude and amplified pressures on its price.
OPEC and allies, including Russia, making up a group known as OPEC+, are slated to commence cuts equating to 9.7 million a barrel a day, about 13% of global production, but that is viewed by experts as doing little to address a global glut of historic proportions.
Adding to the problems of crude has been the demand shock resulting from the outbreak of the novel strain of coronavirus that has brought global economies to a near standstill, delivering a gut punch to oil producers world-wide.
According to reports, countries including Kuwait also have started to cut production ahead of the start of the May 1 date for agreed upon cuts to start.
Meanwhile, U.S. shale producers have continued shutting down oil-drilling rigs. Baker Hughes BKR, -1.10% on Friday reported that the number of active U.S. rigs drilling for oil dropped by 60 to 378 this week. That marked a sixth straight weekly decline and implied further declines in domestic oil output.
See:Could the crude oil market bust spell trouble for highflying U.S. stocks?
