Oil Prices Plunge on Rising Supplies

• Oil Prices Plunge on Rising Supplies

Oil prices once again nosedived on Monday after several reports pointed to rising oil inventories despite oil storage, especially in the US, at almost full capacity.

A recent report by the U.S. Energy Information Administration revealed that U.S oil inventories rose by 15 million barrels to 518.6 million barrels for the week ended April 17. This was followed by another report by CNBC that oil in storage jumped by 10 percent in a week to 59.7 million barrels, 25 million barrels below full capacity.

These, coupled with a report by Financial Times that the United States Oil Fund (USO), world’s largest oil-backed exchange-traded fund, has started liquidating its short-term contracts out of fear that the commodity might plunge below zero again like a week ago.

USO announced on Monday it would sell its futures contracts for the delivery of oil in June — 20 percent of its $3.6bn portfolio — over a four-day period.

“By selling shorter-dated future contracts and investing into longer-dated contracts, they are putting pressure on the front WTI contract,” said Giovanni Staunovo, a commodities analyst at UBS.

The price of West Texas Intermediate oil declined by $1.93 or 11.4 percent on Monday afternoon in Asia. While Brent crude oil, On Monday afternoon in Asia, US. crude was down $1.93, or 11.4 percent, to $15.01 per barrel, while Brent crude futures slipped $1 or 4 percent to $20.10.

“Concerns surrounding rising global inventories, especially in the US with the coronavirus pandemic weighing on gasoline consumption are pressuring oil prices,” Kim Kwang-rae, commodities analyst at Samsung Futures Inc, told the Bloomberg news agency. “While OPEC has started to curb output, demand is still not being supported and that’s going to be a down factor for prices.”