US oil prices fell heavily Monday on renewed concerns over storage capacity as the coronavirus throttles demand, even as producers start slashing output to boost markets.
US benchmark West Texas Intermediate dropped 9.3 percent to $15.36 a barrel in Asian morning trade. Brent crude, the international benchmark, was off 3.2 percent at $20.75 a barrel.
Prices have collapsed in recent weeks as demand for the commodity evaporated owing to lockdowns and travel restrictions imposed worldwide to fight the virus. Last week, US oil fell below zero for the first time as investors scrambled to offload it before the expiry of a trading contract, but could not readily find buyers. Prices have recovered since, but remain at their lowest levels for years. A key worry for traders is that storage facilities — particularly in the United States — cannot cope with the oversupply.
“Concerns surrounding rising global inventories, especially in the US with the coronavirus pandemic weighing on gasoline consumption, are pressuring oil prices,” Kim Kwangrae, commodities analyst at Samsung Futures Inc, told Bloomberg News.
The continued concerns about storage overshadowed signs that some countries, including Kuwait and Algeria, are starting to slash production in line with a major agreement hammered out this month. Top producers have agreed to reduce output by 10 million barrels a day from May to shore up markets, a deal that marked an end to a price war between Russia and Saudi Arabia.
Analysts said that positive signs in the virus fight, with Italy and New York laying out partial reopening plans and death rates slowing in hard-hit countries, kept prices from falling too heavily.