LONDON: Oil prices fell on Monday, with a US crude futures contract hitting its lowest level since 1999, depressed by concern that US crude storage will soon be full while companies prepare to report the worst quarterly earnings since the financial crisis.
Brent was down $1.12, or 4%, at $26.96 a barrel by 1008 GMT. Front-month May West Texas Intermediate (WTI) contract fell $4.79, or 26.2%, to its lowest since March 1999 at $13.48, though the sell-off was exaggerated by the contract’s imminent expiry.
“The May contract is set to expire tomorrow (Tuesday) and the bulk of the open interest and volume is already in the June contract,” said ING’s head of commodities strategy Warren Patterson.
The June contract, which is more actively traded, fell $2.18, or 8.7%, to $22.85 a barrel.
The volume of oil held in US storage, especially at the Cushing delivery point for the US WTI contract in Oklahoma, is rising as refiners throttle back activity in the face of weak demand.
“As production continues relatively unscathed, storage is filling up by the day. The world is using less and less oil and producers now feel how this translates in prices,” said Rystad’s head of oil markets Bjornar Tonhaugen.
Oil in floating tanker storage is also estimated at a record 160 million barrels.
The mood in other markets was also cautious as the first-quarter earnings season gets underway. Analysts expect Stoxx 600 companies to post a 22% plunge in earnings, which would represent the steepest decline since the 2008 global financial meltdown, IBES data from Refinitiv showed.
The German economy is in severe recession and recovery is unlikely to be quick, given that many coronavirus-related restrictions could stay in place for an extended period, the Bundesbank said on Monday.
Japanese exports declined the most in nearly four years in March as US-bound shipments, including cars, fell at their fastest rate since 2011.
Bearish sentiment was reinforced by lowered oil consumption forecasts from the Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).
The oil industry has been reducing output swiftly to counter an estimated 30% decline in fuel demand worldwide.
Production cuts from OPEC and allies including Russia will take effect from May. The OPEC+ group has agreed to reduce output by 9.7 million bpd.
Officials in Saudi Arabia have forecast global supply cuts from oil producers could total nearly 20 million bpd, but that includes voluntary cuts from the likes of the United States and Canada, which are unable to turn production on or off in the way that most OPEC nations can.