The soon-to-expire May contract for the U.S. oil benchmark was on track Monday to finish in single digits for the lowest close and biggest one-day plunge on record for a front-month contract, reflecting a growing glut of crude and a lack of storage space.
West Texas Intermediate crude for May delivery CLK20, -98.90% CL.1, -98.90% was down $15.71, or 86%, at $2.66 a barrel. The May contract expires on Tuesday. The one-day drop would be the largest on record going back to 1983, while a finish near its current level would be far below the previous all-time low for a front-month contract at $10.42 a barrel set on March 31, 1986, according to Dow Jones Market Data.
The huge drop in the nearby contract reflects traders scrambling to exit long positions that would require them to take physical delivery of crude amid dwindling storage space. It also reflects a convergence with the physical spot price for oil.
“The collapse…is mostly a reflection of traders rolling contracts to June as no one wants to take delivery because storage capacity is getting close to being reached,” said Edward Moya, senior market analyst at Oanda, in a note.
The trading action comes after the May contract posted a 19.7% weekly loss on Friday.
Monthly reports from the Organization of the Petroleum Exporting Countries and the International Energy Agency have underscored a period of flagging appetite for crude, even as major oil producers have forged a historic pact to curb output by some 10 million barrels a day, in an effort to end a price war between Saudi Arabia and Russia and stabilize prices that have been swooning.