Brent crude futures plunged 25 per cent on Tuesday to the lowest in nearly two decades, a day after panicked traders sent US oil below minus $40 per barrel on fears of a historic glut due to the destruction of fuel demand by the coronavirus pandemic.
Monday's historic crash in US crude futures saw the front-month May contract, which expires Tuesday, settling at negative $37.63 a barrel as traders facing a dearth of storage space and customers scrambled to avoid taking delivery of barrels.
While that trade was anomalous, the steep decline in Brent and U.S. futures expiring in June showed the market remained worried that the overwhelming supply and weak demand will persist for weeks.
Brent futures for June delivery fell $6.52, or 25.5 per cent, to $19.05 a barrel by 12:46 p.m. EDT (8.46pm in UAE), while U.S. West Texas Intermediate (WTI) crude for June fell $9.09, or 44.5%, to $9.09.
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 $11.00, the lowest for that contract since December 1998.
WTI for May delivery, meanwhile, rebounded from its negative condition. It was trading at $4.80 a barrel, as most of open positions 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, delivery point for WTI, is expected to be full within weeks.
"There is nothing to make energy traders believe that storage constraints, rising inventories, and demand concerns will be alleviated," said Edward Moya, senior market analyst at OANDA in New York.
U.S. President Donald Trump 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.
In Texas, however, oil and gas regulators declined to force producers to curtail oil output.
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 is expected to drop as much as 30%.
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 stabilize 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, analysts polled by Reuters said.
The American Petroleum Institute (API) is set to release its data at 4:30 p.m. (2030 GMT) on Tuesday.