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US oil plummeted to below $ 11 a barrel on Tuesday after a major publicly traded fund began selling its short-term contracts for the commodity, and storage concerns increased as the coronavirus strangled demand. .
West Texas Intermediate, the US benchmark, for June delivery fell 14.8% to $ 10.88 a barrel in the Asian morning trade, a day after falling 25%.
Benchmark international crude Brent fell 4.4% to trade at $ 19.10 a barrel.
Prices have plummeted in recent weeks as demand for the product collapses due to blockades and travel restrictions imposed worldwide to combat the virus.
Last week, US oil fell below zero for the first time when investors rushed to unload it before the expiration of the May trade contract, but were unable to find buyers easily.
The latest slump was fueled by the United States Petroleum Fund, a massive, publicly-traded oil-backed vehicle, saying it would sell all of its holdings in the WTI contract for delivery in June.
By investing in longer-term contacts, the fund’s move put pressure on the June contract, analysts said.
The move highlighted continuing concerns that storage is filling up and that when futures contracts expire, buyers may find that there is little room to place the oil they have purchased.
“The surprising June liquidation is due in part to the reality that storage facilities are rapidly filling up,” said Stephen Innes, global market strategist at AxiCorp.
The Oil Fund measure “is causing a massive distortion of prices between June and July,” he added. The WTI for July delivery was changing hands at over $ 18 a barrel on Tuesday.
Storage concerns have overshadowed signs that some countries are starting to cut production in accordance with a major deal reached this month.
Major producers have agreed to cut production by 10 million barrels per day since May to shore up markets, an agreement that marked the end of a price war between Russia and Saudi Arabia.
Prices have regained ground since falling into negative territory last week, but remain at their lowest levels for years.
