Oil prices slumped again on Tuesday amid concern about dwindling capacity to store crude worldwide, heightened by fears that fuel demand may be slow to pick up once countries ease curbs imposed on business and social life to combat the coronavirus pandemic.
US West Texas Intermediate (WTI) crude CLc1 futures fell to as little as $10.64 a barrel on Tuesday, and were off 12.8%, or $1.64, at $11.14 a barrel as of 0635 GMT. WTI plunged 25% on Monday.
Brent crude LCOc1 futures fell to a low of $18.85 and were last down 4.3%, or 85 cents, at $19.14 a barrel. The benchmark slid 6.8% on Monday, and the contract for June delivery expires on April 30.
Strategists said part of the WTI decline 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 avert massive losses like last week, when WTI plummeted below zero.
The United States Oil Fund LP (USO), the largest oil-focused US exchange-traded product, said it would further shift its holdings into later-dated contracts.
"With the USO ETF due to continuing selling down its June WTI position for the rest of the week, nobody else who needs to, or wants to sell, is hanging around and waiting for them to do so," said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.
Even with the Organisation of the Petroleum Exporting Countries (OPEC) and allies led by Russia having agreed record output cuts of nearly 10 million barrels per day (bpd) from May 1, that volume is not nearly enough to offset a drop in demand of around 30 million bpd due to COVID-19 restrictions.
"Looking ahead, and all attention will be on inventory numbers this week, and in particular the build we see at Cushing, the WTI delivery hub," ING's head of commodities strategy Warren Patterson said.
"If we see similar builds to the last few weeks, we will likely reach full capacity at Cushing over the first half of May, which should maintain bearish pressure on the market."
As a result of the collapse in demand, global storage onshore is estimated to be about 85% full as of last week, according to data from consultancy Kpler.
In a sign of the energy industry's desperation for places to store petroleum, oil traders are resorting to hiring expensive US vessels to store gasoline or ship fuel overseas, shipping sources said.