Hong Kong (CNN Business)US oil prices are still plunging as investors continue to fret about an excess supply of crude at a time when no one wants any.
West Texas Intermediate plummeted more than 14% to $10.95 during Asian trading hours Tuesday, accelerating earlier, dramatic declines. The US benchmark, of oil to be delivered in June, settled at $12.78 a barrel on Monday — a drop of more than 20%.
The latest crash came as the United States Oil Fund — a popular fund geared to track the price of oil — said in a regulatory filing that it would dump its June oil contracts this week and reduce contracts for other upcoming months. Instead, the ETF will buy into longer-term oil contracts.
The announcement was yet another sign of how much the coronavirus pandemic has caused oil demand to evaporate, leaving the world without much room to store barrels of excess supply that aren’t being used.
“With the USO ETF due to continuing selling down its June WTI position for the rest of the week, nobody else who needs to, or wants to sell, is hanging around and waiting for them to do so,” wrote Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, in a Tuesday research note. “That is an entirely sensible self-preservation strategy with the ability to stay alive trading oil markets in short supply these past two weeks.”
US oil experienced a stunning collapse last week when futures for May delivery traded well below $0 a barrel. Since then, that contract has expired and investors are now trading on the June contract. But now that price is in danger of slipping below $10.
“The startling June sell-off is in part due to the reality of storage facilities filling up rapidly,” wrote Stephen Innes, chief global markets strategist at AxiCorp, in a Tuesday research note.
Brent crude also fell Tuesday. The global benchmark was last down 5% to $18.96 a barrel.
Stock markets in the United States shrugged off oil’s fall on Monday: Every benchmark index closed higher. Futures for the Dow (INDU), S&P 500 (SPX) and Nasdaq (COMP) were all lower after hours, albeit only by 0.3% to 0.4%.
Asian stock markets, meanwhile, were mixed. Japan’s Nikkei 225 (N225) was last down 0.6%, while South Korea’s Kospi (KOSPI) was flat. China’s Shanghai Composite (SHCOMP) was up 0.1%. Hong Kong’s Hang Seng Index (HSI) ticked up 0.8%.
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