Oil prices extend losses amid concerns over rising global supply glut

Crude prices continued to freefall on Tuesday, with US West Texas Intermediate (WTI) trading around $10 a barrel amid fears that the world is running out of places to store the commodity as the Covid-19 outbreak crushes demand.

The price of WTI contracts for June delivery fell by nearly 20 percent on the New York Mercantile Exchange, extending the huge decline in the previous session that erased around a quarter of their value. Meanwhile, international benchmark Brent traded down five percent, at $18.91 per barrel.

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The energy market has been facing an unprecedented crisis amid the coronavirus pandemic, which has lowered global demand for the commodity by around 30 percent, according to some estimates. As production levels remain well above the demand, the world has been running out of space to store extra barrels of oil. The situation has reportedly forced US producers to start storing oil in the US emergency stockpile. More than one million barrels were delivered into Strategic Petroleum Reserve storage in April, Bloomberg reported, citing an official.

The news from the United States Oil Fund, the exchange-traded fund (ETF) directly exposed to US oil markets, became a pretext for Monday’s steep drop in oil prices. The fund announced that it is set to dump most active June contracts this week and reduce contracts for other upcoming months, opting for longer-term futures contracts.

The fresh slide came a week after WTI plunged into negative territory for the first time ever, as the contract for May delivery was set to expire the next day, forcing holders to rush to find buyers.

Massive output cuts, agreed by the 13 members of the Organization of the Petroleum Exporting Countries and allied oil exporters, are set to come into force next month. While Russia and some other producers have reportedly started slashing oil production ahead of schedule, it is still unclear if the measure will help to significantly boost oil prices.

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