Oil is currently trading at a 21-year low of $10 after crashing by 82% since the turn of the year on the back of fears over storage.
It is down by more than 40% today alone as panic begins to set in with demand drying up in light of the coronavirus pandemic.
Another factor to consider is the upcoming earnings reports from global companies, with it expected to be the worst since the 2008 financial crisis.
United States oil reserves are currently stored in Cushing, Oklahoma, although as demand wanes the storage facility is filling up at an alarming rate.
“As production continues relatively unscathed, storages are filling up by the day. The world is using less and less oil and producers now feel how this translates in prices,” Rystad’s head of oil markets Bjornar Tonhaugen said.
The Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency have both also posted bearish forecasts as the global economy continues to weaken.
The oil market is rapidly becoming more volatile than assets like Bitcoin, with it bouncing by more than 15% from the lows before making another move to the downside.
It’s thought that the drop in US markets is exaggerated due to upcoming expiry of the May contract.
“The May contract is set to expire tomorrow, and the bulk of the open interest and volume is already in the June contract,” ING’s head of commodities strategy Warren Patterson said.
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