London
US oil nosedived towards US $ 10 a barrel Tuesday after a major exchange-traded fund started selling its short-term contracts of the commodity, and storage concerns mounted as the coronavirus strangled demand.
In morning London deals, West Texas Intermediate crude for June delivery tumbled more than 21 percent to $10.07—having plunged 25 percent a day earlier.
International benchmark Brent crude slid 4.9 percent to trade at $19.01 a barrel.
The latest market drop was driven by the United States Oil Fund—a massive, oil-backed exchange-traded fund (ETF)—saying it would sell all its holdings in the contract for June delivery.
By investing in longer-dated contacts, the fund’s move put pressure on the June contract, analysts said.
The move highlighted continued concerns that storage is filling up and that when futures contracts do expire, buyers may find there is little space to put the oil they have purchased.
“Oil is back in focus, with the June WTI contract plunging again as the largest US oil ETF plans to offload all of its holdings of the contract in the coming days and instead buy up longer dated contracts,” OANDA analyst Craig Erlam told AFP.
“I am sure they are not the only ones that have learned the lessons of last week and opted to avoid another episode in the coming weeks.—AFP
