Oil down as storage fills

Oil continued its drop on Tuesday morning in Asia even as it clawed back its losses from the previous session.

Brent oil futures fell 2.22% to $22.51 by 9:48 PM ET (2:48 AM GMT) on the second trading day of its June contract and US WTI futures slumped 13.93% to $11.

In the previous session, WTI futures slid almost 25% and Brent oil futures dropping 6.76%. The losses came after the United States Oil Fund (NYSE:USO) said overnight that it would sell off all its contracts for June delivery, replacing them with longer-term contracts to manage the volatility in oil prices.

Investors are also wary that WTI futures could repeat its journey into negative territory last Monday when its June contract expires on May 19, with no signs of a recovery in demand and storage spaces fast running out.

Even as <a href=’https://staging.theenergyyear.com/companies-institutions/opec/’>OPEC+ starts the daily 9.7-million-barrel production cut agreed to in early April from Friday, and even as US producers such as Exxon (NYSE:XOM) and Chevron (NYSE:CVX) agree to decrease their output, shutting down wells will be costly and time-consuming.

“The market knows that the storage problem remains, and we are on a calculated path to reach tank tops in weeks,” Bjornar Tonhaugen, head of oil markets at Rystad Energy, told CNBC.

“Actions are needed now as the problem stopped being theoretical and far away. The storage clock is ticking for producers and we are approaching the final countdown if no further action is taken.”