U.S. oil futures continued to trade in negative territory on Tuesday, after closing down nearly $40 on Monday in their first-ever sub-zero dive, as concerns grew the United States will run out of storage for a glut caused by the coronavirus lockdown.
Global benchmark Brent crude also fell sharply in response to the collapse of demand following reduced economic activity.
U.S. West Texas Intermediate (WTI) crude for May delivery traded at minus $7 a barrel by 0955 GMT, up $30.63 from Monday's close when the contract settled at a discount of $37.63 a barrel.
The slump in the U.S. contract was exaggerated by the looming expiry late on Tuesday of the front-month contract for the delivery of oil in May when the lack of storage is set to be particularly acute.
Global benchmark Brent crude for June delivery was down $5.25, or 21% at $20.32 per barrel.
The more-active June contract for WTI also plunged $4.79, or 23.5%, to $15.64 a barrel. June trading volumes were roughly 80 times those of the expiring May contract.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, a grouping known as OPEC+, agreed this month to cut output by 9.7 million barrels per day (bpd).
But that cut will not take place before May, and is not considered enough to restore market balance.
"The recently agreed supply cuts do little to solve the near-term oversupply problem in the global market," JBC Energy said in a note.
Describing the drop in U.S. oil futures as short-term and stemming from a "financial squeeze", U.S. President Donald Trump on Monday said his administration would consider halting Saudi crude oil imports.
"Negative prices are a temporary glitch reflecting stressed flows in the futures markets and stressed storage conditions somewhere in the U.S. Midwest," Swiss bank Julius Baer's Head of Economics Norbert Ruecker.
The main U.S. storage hub in Cushing, Oklahoma, the delivery point for the U.S. West Texas Intermediate (WTI) contract, is expected to be full within weeks.
Restrictions on movement to try to contain the novel coronavirus have reduced oil demand by an estimated 30%, resulting in a huge surplus of crude in need of storage.
U.S. crude inventories were expected to rise by about 16.1 million barrels in the week to April 17 after posting the biggest one-week build in history, five analysts polled by Reuters found.
The American Petroleum Institute is set to release its data at 4:30 p.m. (2030 GMT) on Tuesday.
(Reporting by Noah Browning and Jane Chung; editing by Barbara Lewis and Andrew Heavens)
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