Earlier, US crude oil futures collapsed below $0 on Monday for the first time in history, amid a coronavirus-induced supply glut, ending the day at a stunning minus $37.63 a barrel as desperate traders paid to get rid of oil. Brent crude, the international
benchmark, also slumped, but that contract was nowhere near as weak because more storage is available worldwide.
Traders fled from the expiring May US oil futures contract in a frenzy on Monday with no place to put the crude, but the June WTI contract settled at a much higher level of $20.43 a barrel.
"Demand destruction from Covid-19 will see a slower expected reopening of the U.S. economy," said Edward Moya, senior market analyst at broker OANDA, predicting a weak period for oil prices. "The WTI crude June contract was able to hold the $20 a barrel level and is seeing a modest gain following the painful rollover of the May contract."
Oil prices have skidded as travel restrictions and lockdowns to contain the spread of the coronavirus curbed global fuel use, with demand down 30 per cent worldwide. That has resulted in growing crude stockpiles with storage space becoming harder to find.
The main U.S. storage hub in Cushing, Oklahoma, the delivery point for the U.S. West Texas Intermediate (WTI) contract, is now expected to be full within a matter of weeks.
"Today it's pretty clear that a major issue in the market is a glut in the United States and lack of storage capacity," said Michael McCarthy, chief market strategist, CMC Markets in Sydney.
Faced with the situation, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, a grouping known as OPEC+, have agreed to cut output by 9.7 million barrels per day (bpd). But that will not take place before May, and the size of the cut is not viewed as big enough to restore market balance.
"Not even the OPEC+ supply agreement is likely to stem the flow in selling in the short term," ANZ Research said in a note.
Meanwhile, U.S. crude inventories were expected to rise by about 16.1 million barrels in the week to April 17 after posting the biggest one-week build in history, according to five analysts polled by Reuters. Analysts expected gasoline stocks to rise by 3.7 million barrels last week.
The American Petroleum Institute is set to release its data at 4:30 p.m. (2030 GMT) on Tuesday, and the weekly report by the U.S. Energy Information Administration is due at 10:30 a.m. on Wednesday.
Will to add 75 mn barrels to nation's strategic petroleum reserve: Trump
United States President Donald Trump on Monday said that he is planning to add as much as 75 million barrels of oil to the nation's strategic petroleum reserve as the oil prices crashed due to the coronavirus pandemic.
"We are filling up our national petroleum reserves. We are looking to put as much as 75 million barrels into the reserves themselves," Trump said at a daily briefing on Monday.
He said that his administration will look into halting oil imports from Saudi Arabia after oil prices in the United States plummeted into negative.
"We'll look at it," Trump said on Monday when asked if the United States will block Saudi oil shipments into the United States after prices went negative earlier in the day.