Oil prices slide again as world runs low on storage capacity amid plunge in demand

MELBOURNE, April 28 (Reuters) - Oil fell on Tuesday, adding
to huge declines in the previous session, on worries about
limited capacity to store crude worldwide and expectations that
fuel demand may only recover slowly as coronavirus pandemic
restrictions are gradually eased.
U.S. West Texas Intermediate (WTI) crude CLc1 futures
dropped by as much as 7.1% and were off 6%, or 77 cents, at
$12.01 a barrel as of 0110 GMT. WTI plunged 25% on Monday.
Brent crude LCOc1 futures fell as much as 3.5% in early
trade and were last down 1.4%, or 27 cents, at $19.72 a barrel.
The benchmark slid 6.8% on Monday, and the contract for June
delivery expires on April 30.
Strategists said part of the WTI decline is due to retail
investment vehicles like exchange-traded funds selling out of
the front-month June contract and buying into months later in
the year to avert massive losses like last week, when WTI
plummeted below zero.
"Clearly everything's getting dragged down by the
machinations in the WTI futures market," said Daniel Hynes,
senior commodity strategist at Australia and New Zealand Banking
Group (ANZ) in Sydney.
The main concern is that there is nowhere to store all the
oil that is not being consumed due to the drop in global
economic activity amid restrictions imposed around the world to
curb the spread of the new coronavirus.
Even with the Organization of the Petroleum Exporting
Countries (OPEC) and allies led by Russia having agreed record
output cuts of nearly 10 million barrels per day (bpd) from May
1, that volume is not nearly enough to offset a drop in demand
of around 30 million bpd due to COVID-19 restrictions.
"While we're starting to see COVID-19 cases ease and some
countries ease restrictions, those initial moves look fairly
tentative. The market's coming round to the view there's going
to be no quick recovery in demand," Hynes said.
As a result of the collapse in demand, global storage
onshore is estimated to be about 85% full as of last week,
according to data from consultancy Kpler.
In a sign of the energy industry's desperation for places to
store petroleum, oil traders are resorting to hiring expensive
U.S. vessels to store gasoline or ship fuel overseas, shipping
sources said. "It is hard to see sentiment turning convincingly positive
for oil until there's evidence of OPEC cuts and demand
improvement slowing or reversing the global inventory build,"
said AxiCorp's chief global market strategist, Stephen Innes.