LONDON — Oil prices fell on Monday on concerns about scarce storage capacity and global economic doldrums from the coronavirus pandemic.
U.S. oil futures led losses, falling by more than $2 a barrel on fears that storage at Cushing, Oklahoma, could reach full capacity soon.
U.S. West Texas Intermediate CLc1 June futures fell $2.42, or 14.3%, to $14.52 a barrel by 0830 GMT.
Brent crude LCOc1 was down 90 cents, or 4.2%, at $20.54 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% and WTI off around 7%.
The June WTI contract’s price fall may have been triggered by investors moving to later months to avoid a similar fate, with the front-month contract trading at lower-than-usual volumes.
Retail investors were caught off guard last week when the May WTI contract plunged into negative territory for the first time ahead of its expiry as traders scrambled to avoid having to take delivery of oil.
“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.
U.S. 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% full as of mid-April, although traders said all available space was already leased.
Global economic output is expected to contract by 2% this year, worse than the financial crisis, while demand has collapsed 30% due to the pandemic.
In the United States, 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% annually in the second quarter.
The Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, pledged this month to cut output by an unprecedented 9.7 million barrels per day in May and June.
Kuwait and Azerbaijan are coordinating oil output cuts, while Russia is set to reduce its western seaborne exports by half in May.
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*Noah Browning; Florence Tan & David Gaffen; editing: Richard Pullin & Jason Neely – Reuters