Oil prices skid on oversupply, storage concerns
LONDON: Oil prices fell on Monday on concerns about scarce storage capacity and global economic doldrums from the coronavirus pandemic.
US oil futures led losses, falling by more than $2 a barrel on fears that storage at Cushing, Oklahoma, could reach full capacity soon.
US West Texas Intermediate June futures fell $2.86, or 16.88 per cent, to $14.08 a barrel by 1100 GMT. Brent crude was down 83 cents, or 3.9 per cent, at $20.61 a barrel. The June Brent contract expires on Thursday.
Oil futures marked their third straight week of losses last week — and have fallen for eight of the past nine — with Brent ending down 24 per cent and WTI off around 7 per cent.
The June WTI contract’s price fall may have been partly triggered by investors moving to later months after the May contract lapsed into negative territory for the first time ever before expiring last week.
The front-month contract was trading at lowerthan-usual volumes.
“The market is very concerned of a repeat of negative pricing as the Cushing storage and delivery hub saturates,” Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.
“The shift of open interest away from June will have negative consequences for the liquidity of the contract, potentially leading to greater volatility in its price,” he added.
US crude inventories rose to 518.6 million barrels in the week to April 17, near an all-time record of 535 million barrels set in 2017.
Cushing, the delivery point for WTI, was 70 per cent full as of mid-april, although traders said all available space was already leased.
Global economic output is expected to contract by 2 per cent this year, worse than the financial crisis, while demand has collapsed 30 per cent due to the pandemic.
In the US, a record 26.5 million Americans have filed for unemployment benefits since mid-march, and the Congressional Budget Office predicted that the economy would contract by nearly 40 per cent annually in the second quarter.