NEW YORK (Reuters) – Oil futures for June plunged to near two-decade lows on Tuesday, as the panic that sent U.S. May futures to below minus $40 per barrel on Monday bled further into the markets due to worries about the coronavirus pandemic’s effect on fuel demand in a market overrun by supply.

FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant

U.S. crude futures slumped in dramatic fashion on Monday, with the front-month May contract, which expires Tuesday, settling at negative $37.63 a barrel. That steep fall came as traders scrambled to get out of the contract to avoid taking delivery of barrels for fear of nowhere to store the oil and lack of customers who want to buy it.

While that trade is somewhat anomalous, the steep decline in both Brent and U.S. futures expiring in June shows that the market is worried that the overwhelming supply and weak demand will leave barrels without a home for weeks to come.

Brent futures LCOc1 for June delivery fell $6.34, or 24.8%, to $19.23 a barrel by 11:45 a.m. EDT (1545 GMT), while U.S. crude CLc2 for June fell about $7, or 35%, to around $13.34.

At their session lows, the Brent front-month fell to $18.10 a barrel, its lowest since December 2001, while the WTI second-month fell to $11.79, the lowest for that contract since February 1999.

WTI for May delivery CLc1, meanwhile, rebounded from its negative condition. It was trading at $5.39 a barrel, as most of the open positions in that contract coming into this week were settled on Monday.

“With available storage in short supply, nobody wanted to hold a contract about to come due,” Konstantinos Venetis, senior economist at TS Lombard, an independent investment research provider, said in a note. “U.S. shale producers are fast approaching the point where they will be forced to shut down operations.”

The main U.S. storage hub in Cushing, Oklahoma, the delivery point for WTI is expected to be full within weeks.

U.S. President Donald Trump on Tuesday called on the government to make funds available to the U.S. oil and gas industry, calling Monday’s crash a “financial squeeze” and mooting a halt to Saudi imports.

The Organization of the Petroleum Exporting Countries and its allies, including Russia, have announced sweeping cuts in production, amounting to almost 10% of global supplies. But with economies virtually at a standstill due to coronavirus lockdowns, demand has dropped as much as 30%.

“With no more generous production cuts announced and as the last remaining storage facilities get filled to the top with oil, we can expect to see such huge swings in oil prices from now on,” Louise Dickson of consultancy Rystad Energy said.

“The mild daily changes in the oil price that we were used to some months ago may now become luxuries of another era.”

Kremlin spokesman Dmitry Peskov said leading global oil producers could hold talks again to discuss their output deal further if needed.

Top oil exporter and de facto OPEC leader Saudi Arabia said it was ready to take extra measures to stabilise oil markets along with other producers.

U.S. crude inventories were expected to rise by about 16.1 million barrels in the week to April 17 after posting the biggest one-week build in history, five analysts polled by Reuters found. [EIA/S]

The American Petroleum Institute is set to release its data at 4:30 p.m. (2030 GMT) on Tuesday.

Reporting by David Gaffen in New York, Noah Browning in London and Jane Chung in Seoul; Editing by Marguerita Choy and Kirsten Donovan

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