Oil down on continued oversupply worries

Oil continued to slide from the previous session on Monday in Asia as producers continue to grapple with a supply glut.

International Brent oil futures dropped 1% to $27.80 by 10:17 PM ET (3:17 AM GMT) and WTI futures slid 5.03% to $23.77 as the May futures contract expires on Tuesday.

Investors remain unconvinced that <a href=’https://staging.theenergyyear.com/companies-institutions/opec/’>OPEC+’s cut of nearly 10 million barrels agreed to in early April will ease oversupply as countries continue to extend lockdowns imposed to prevent the spread of the COVID-19 pandemic and economies contract.

“The current prices show that the OPEC+ cuts proved to be a blip, with oil prices at the mercy of the virus once again,” Vandana Hari, founder of Vanda Insights, told Bloomberg. “Until we approach a lifting of the lockdowns in the US, oil may drift lower or remain rangebound around current levels.”

David Lennox, resource analyst at Fat Prophets, agreed with Hari.

“The output cut that we’ve seen, or supposed to see coming, isn’t sufficient to cover the 25 million to 30 million barrels of daily demand that’s being destroyed by Covid-19. We have to see a peak for COVID-19 globally to get a clearer picture of how much demand will be destroyed,” he told Bloomberg.

There were also concerns that countries’ storage capacity is rapidly running out.

“Concern continues to mount that storage facilities in the US will run out of capacity,” with stockpiles rising almost 50% since the start of March, Australia & New Zealand Banking Group said in a note.

But, “We hold some hope for a recovery later this year,” the noted added.

Meanwhile in Asia’s oil hub of Singapore Hin Leong Trading requested court protection from its creditors amid allegations it hid around $800 million in losses from futures trading.