U.S. oil prices remained under pressure on Tuesday, after the June contract saw its second-lowest settlement on record as concerns over a lack of storage for the commodity continued to dog the market.
The front-month June WTI crude
fell $2.64, or 20%, to $10.14 a barrel. The contact lost $4.16, or 24.6%, to settle at $12.78 a barrel on Monday. The contract fell 32.3% last week, the biggest weekly decline on record based on most-active contracts. The now-expired May contract traded in negative territory for the first time in the history of the energy complex.
Piling on the pressure Monday, the world’s biggest oil exchange-traded fund, United States Oil Fund LP
said it will further cut holdings of crude contracts in specific months, leaving it with 30% of its holdings in the July futures contracts, and 15% in each of the August, September, October, and December contracts.
June Brent crude
the international benchmark, declined by 3.2%, or 66 cents, to $19.32 a barrel, after a 6.8% drop to $19.99 on ICE Futures Europe on Monday. The contract fell 23.7% last week.
Storage capacity around the world is dwindling as economic shutdowns due to the global pandemic has weighed on demand for oil.
“For the next week or so the pressure on global storage capacity for oil and oil products remains in focus, despite optimistic news key economies could begin opening soon,” said Stephen Innes, global chief market strategist at AxiCorp, in a note to clients.
“It will take a while to get the delivery messes settled, but if we can get through Brent delivery unscathed we could quickly pivot to the global economy reopening and shut-ins narratives which could present a more glass half full rather than glass empty view for oil prices,” he said.