US oil prices fell heavily on Monday on renewed concerns over storage capacity because the coronavirus throttles demand, at the same time as producers start slashing output to boost up 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 slumped in recent weeks as demand for the commodity evaporated due to lockdowns and travel restrictions applied all over the world to combat the COVID-19.
Last week, US oil fell below zero for the first time as investors scrambled to dump it before the expiry of a trading contract, but couldn’t 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 within the u. s. — cannot grapple 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 beginning to slash production in line with a significant agreement hammered out this month.
Top producers have agreed to scale back output by 10 million barrels daily from May to sustain markets, a deal that marked an end to a price war between Russia and Saudi Arabia.
Analysts said that positive signs within 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.
