Oil dropped back below $15 a barrel as swelling global crude stockpiles made it more difficult for leading producers to balance the market by curbing output.
Futures in New York slid 16%, snapping a four-day gain. WhileU.S. drilling is sliding and Saudi Arabia has startedreducing output ahead of the start date for OPEC+ supply cuts, an immense glut of oil means storagetanks are close to capacity around the world.South Korea became the fourth Asian nation to run out of commercial storage space on Monday.
On a global level the swelling glut is set totest storage capacity limits in as little as three weeks, according to Goldman Sachs Group Inc., with traders, refiners and infrastructure providers seeking novel ways to hoard crude, including on tinybarges around Europe’s petroleum-trading hub and inpipelines. The hub of Cushing, Oklahoma, the delivery point for American crude futures, is filling fast and putting added pressure on the U.S. benchmark.
“While bringing forward cuts by a handful of producers is helpful, it will have little impact on the oil balance in the short term,” said ING analysts including Warren Patterson.
There were tentative signs at the weekend that the coronavirus outbreak might be loosening its grip, with the death tollsslowing by the most in more than a month in Spain, Italy and France. Reported fatalities in the U.K. and New York were the lowest since the end of March.
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Saudi Aramco last week began curtailing daily output from about 12 million barrels to 8.5 million barrels a day, according to a Saudi industry official familiar with the matter. OPEC+ hasagreed to reduce production by about 9.7 million barrels a day in an effort to stem oil-price losses.
Read: The Next Chapter of the Oil Crisis: The Industry Shuts Down
In a sign that investors are fleeing the volatility at the front of the curve, holdings of June WTI fell by almost 40% last week. On Friday, the U.S. Oil Fund ETF said it is underregulatory pressure because of the size of some of its futures positions
“The shift of open interest away from June, should it pursue, will have negative consequences for the liquidity of the contract, potentially leading in our view to greater volatility in its price.,” said BNP Paribas head of commodities strategy Harry Tchilinguirian.
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— With assistance by James Thornhill, and Grant Smith
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