Crude oil futures fell on Monday with US futures falling more than 10% to levels not seen since 1999 amid concerns that US storage facilities will soon become full as demand fades due to the Coronavirus pandemic.
US oil stocks are increasing, especially in Cushing, Oklahoma, the delivery point for the US West Texas Intermediate contract (WTI), with refinery activity disrupted due to falling demand. Floating storage in tanks is estimated at 160 million barrels.
The May WTI contract fell $3.48, or roughly more than 21%, to $14.20 a barrel since the start of the week’s trading, the lowest level since March 1999.
This contract will expire on Tuesday, while the June contract, which has become more active, fell to $222.70 a barrel, before settling at current $23.23 levels. Brent crude also fell to $26.89 a barrel, before stabilizing at current $27 levels.
Investors bought June WTI contracts and sold the May futures before they expired, extending the price difference between the two months to a record $8.70 a barrel.
Bleak forecasts from OPEC and the International Energy Agency on oil consumption outlook fueled the downward trend, and the oil industry is cutting production rapidly in the face of an estimated 30% drop in fuel demand worldwide due to the Coronavirus epidemic.
Production cuts from OPEC and allies, including Russia, will begin in May. The OPEC+ group agreed to reduce production by 9.7 million barrels per day.
Officials in the Kingdom of Saudi Arabia expect that the total global supply cuts from oil producers will reach nearly 20 million barrels per day, but this includes voluntary cuts from countries such as the United States and Canada, which cannot simply start or stop production in the same way as most other countries.