Oil prices extended decline on Monday, with US WTI futures touching the lowest since 1999, amid mounting concerns that US storage facilities will soon reach full capacity. The coronavirus pandemic has destroyed demand for transportation fuels which forced US refiners to scale back operations. As a result, crude volume at the main US storage facilities at Cushing is rising.
Oil prices continue to decline despite a commitment from OPEC+ and other oil producers to cut supply by up to 20 million bpd from May. This will be the largest-ever crude oil supply reduction. However, analysts expect that the demand destruction caused by the pandemic will exceed such a figure. The weak economic outlook also weighs on oil prices.
Many oil companies have announced production cuts, including majors such as Chevron, BP, and Total. However, the weak economic outlook is expected to weigh on oil demand. Exploration and production companies in North America have pledged about a 36% cut in their budgets, while worldwide companies have reduced budgets by 23%, on a yearly basis, according to analysts at Evercore ISI.
The front-month WTI May futures contract CLc2, which will expire on Tuesday, dropped $3.40 (8.6%) to $14.87/barrel by 0600 GMT, after hitting $14.47/barrel at one point, the lowest since March 1999. The June contract CLc2 fell $1.51 (6.0%,) to $23.52/barrel. The international benchmark Brent LCOc1 also declined 90 cents (3.2%) to $27.18/barrel.
