LONDON (Reuters) – Benchmark Brent and U.S. oil futures for June delivery plunged to around two-decade lows on Tuesday, a day after U.S. May futures sank into negative territory for the first time in history as demand tumbled due to the coronavirus crisis.

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

Brent for June delivery LCOc1, known as the front-month contract after the May futures contract expired, fell to as low as $18.10, its lowest since November 2001. At 1200 GMT, it was down 18% at $20.98.

The June contract for U.S. West Texas Intermediate (WTI) crude CLc2 dropped 21% to $16.14, after hitting its lowest since 1999.

WTI for May CLc1, in which trading turnover is much lower, hit negative $3.99, after Monday’s dive below $0 for the first time, settling at negative $37.63 a barrel.

The slump in the U.S. contract was exaggerated by the looming expiry later on Tuesday of the front-month contract for May. With the market oversupplied and storage facilities already brimming, holders of the contract for May delivery were in the unprecedented position of having to pay those taking the crude.

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

OPEC 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%.

“The recently agreed supply cuts do little to solve the near-term oversupply problem in the global market,” JBC Energy said in a note.

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

U.S. President Donald Trump, who described the drop in the U.S. front-month crude price as a short-term issue caused by a “financial squeeze”, said his administration would consider halting imports of oil from Saudi Arabia, the world’s biggest exporter who spearheaded OPEC efforts to curb output.

“Negative prices are a temporary glitch reflecting stressed flows in the futures markets and stressed storage conditions somewhere in the U.S. Midwest,” Swiss bank Julius Baer’s economics head Norbert Ruecker said.

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 Noah Browning and Jane Chung; Editing by Barbara Lewis and Edmund Blair

Source Article