Brent drops over 9% on storage capacity worries

Brent crude continued to fall as the US market opened on Monday, dropping more than 7%, on fears of running out of storage tanks capacity, especially in the US, in addition to doubts about the output cut agreement and its potential to lessen the gap between the global supply and demand, after the latter collapsed due to the coronavirus pandemic.

Brent crude lost 9.4% to $19.90 a barrel, after opening at $21.98, with a high of $21.90.

Brent crude futures gained 1.8% on Friday, the third straight daily gain, on hopes for a deeper output cut by the major producers.

During the past week, Brent lost 22%, posting the third straight weekly loss, on fears over global demand, and a wider gap between supply and demand.

Oil is currently facing another crisis, as most countries are running out of storage tanks capacity, especially in the US, the world's largest oil consumer.

The US storage facilities in Cushing, Oklahoma, are about to reach full capacity, after the commercial crude inventories rose to 519 million barrels in the week ending in April 17, near the all-time high of 535 million barrels reached in 2017.

This came alongside doubts about the OPEC-Plus output cut agreement, which is due next May, amid expectations for cuts to reach 20 million barrels per day, as the major producers aim at deepening their supply cut to balance the market and the falling prices.

The global coalition agreed on a production cut by 9.7 million bpd, while other countries including the US are expected to cut another 10 million bpd, bringing the global decline in supplies to 20 million bpd.  

The global oil demand is currently 30 million bpd lower, according most international energy agencies, and it's expected to collapse even more, if the the "Great Lockdown" of the global economy continues further. 

The decline in demand far outstrips the output cut agreed upon by OPEC plus countries, bringing the global surplus in supplies to 10 million bpd, which weighs further down on the global oil industry.