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West Texas Intermediate crude oil futures for June delivery were down 25 percent at $12.78 a barrel while Brent crude oil futures fell 6.76 percent to $19.99.
“There’s a lot of oil out there right now with few buyers, and storage facilities are filling up fast,” Ally Invest strategist Lindsey Bell told FOX Business.
Stay-at-home orders issued by government officials worldwide have removed about 30 million barrels of oil demand from the market each day as nonessential travel has ground to a halt.
The demand shortfall comes as a global supply glut has been aggravated by a price war between Russia and Saudi Arabia. A large amount of oil is available now with few buyers, and storage facilities are filling up fast.
WTI, the U.S. benchmark, posted its largest weekly decline last week, falling 32 percent, as prices for the May contract dipped into negative territory for the first time on record. Brent, the international standard, lost 24 percent, posting its sharpest weekly drop in five weeks.
The world’s largest oil producers at a meeting earlier this month agreed to reduce global production by 20 million barrels per day beginning May 1. OPEC and its allies will reduce daily production by 9.7 million barrels while other large producers including the U.S. and Canada will deliver cuts mostly as a result of lower prices.
Storage capacities at Cushing, Oklahoma, a key U.S. oil hub, swelled to 59.7 million barrels last week, up 8.7 percent from the week prior, according to the U.S. Energy Information Administration. The storage facility tops out at about 76 million barrels.
Deutsche Bank Research analyst Michael Hsueh says it’s possible that some parts of the U.S. could reach storage capacity by next month.
“I would expect increasing stress in onshore capacity as early as mid-May,” Hsueh wrote. “This could mark the low for the oil price, but only if it results in sufficiently large forced shut-ins.”