US oil drops as much as 20% as oversupply concerns keep roiling markets
West Texas Intermediate fell more than 7% early Tuesday to $11.81 a barrel. Earlier the US benchmark contract for oil to be delivered in June had fallen as much as 20%, hovering close to $10. It’s now trading about a dollar lower than where it settled Monday after another large plunge.
“The startling June sell off is in part due to the reality of storage facilities filling up rapidly,” wrote Stephen Innes, chief global markets strategist at AxiCorp, in a research note Tuesday.
The announcement was yet another sign of how much the coronavirus pandemic has caused oil demand to evaporate, leaving the world without much room to store the excess barrels that aren’t being used.
“With the USO ETF due to continuing selling down its June WTI position for the rest of the week, nobody else who needs to, or wants to sell, is hanging around and waiting for them to do so,” wrote Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, in a research note.
Brent crude also fell early Tuesday before recovering. The global benchmark was last up 2% at $20.41 a barrel.