Futures contracts for US oil have resulted in losses for fear that storage in Cushing, Oklahoma will soon reach full capacity. Crude stocks in the United States reached 518.6 million barrels in the week before April 17, close to an all-time high of 535 million barrels set in 2017.
Futures contracts for West Texas in June fell $ 1.49, or 8.8%, to $ 15.45 per barrel at 0452 GMT, while Brent crude fell 44 cents, or 2.1%, at $ 21.00 a barrel.
Oil futures marked their third consecutive week of losses last week – and have fallen for eight of the last nine – with Brent down 24% and WTI about 7%.
Retail investors were caught off guard last week when the May WTI contract plunged into negative territory for the first time two days before its expiration as financial operators rushed to avoid having to take delivery of oil.
The drop in prices for the June WTI contract may have been triggered by investors who moved to the following months to avoid a similar fate, said Tony Nunan, senior risk manager at Mitsubishi Corp in Tokyo.
“Anyone who has not had a storage contract for a long time has closed their positions (in June) or advanced very far … because it is suicide to maintain their position after having seen what happened the month last, “he said.
Wush’s delivery point Cushing was 70% full by mid-April, although traders said all of the available space was already rented.
Producers may not cut production fast enough or enough to drive up prices, especially when global economic production is expected to contract by 2% this year, worse than the financial crisis, while demand has collapsed by 30 % due to the pandemic.
Amid haste to cut production, the number of rigs in the United States fell to the lowest since July 2016, while the total number of oil and gas rigs in Canada fell to the lowest since at least 2000, according to data from Baker Hughes.
“The Permian basin and New Mexico accounted for 62% of the closings; a worrying sign given that this region has been one of the most prosperous in the United States, “analysts at ANZ said.
Kuwait and Azerbaijan are coordinating reductions, while Russia is expected to halve exports to the west by sea in May.
The Organization of the Petroleum Exporting Countries and its allies, including Russia, a group known as OPEC +, pledged earlier this month to cut production by an unprecedented amount of 9.7 million barrels per day in May and June.