US West Texas Intermediate (WTI) crude for June delivery settled down $4.16, or 24.6 percent, at $12.78 per barrel on Monday. The Cushing, Oklahoma delivery point for maturing contracts of WTI crude could be filled in about three weeks, if last week’s 5-million build at the hub becomes a trend, data from the Energy Information Administration (EIA) showed.
UK Brent, the global benchmark for crude, closed down $1.74, or 7 percent, on Monday at $23.07 per barrel.
US crude inventories as a whole are poised to surpass in two weeks the 2017 record highs of 535 million barrels if they maintain their average growth rate of 16 million barrels per day, EIA data showed.
US production itself has fallen less than 1 million barrels daily over the past six weeks, sliding from a record high of 13.1 million daily in mid-March to 12.2 million barrels per day last week despite a drop of 305 rigs that actively drill for crude.
"WTI is still waiting to see hard data of US production cuts to trace a firmer support base", Olivier Jakob, founder of Zug, Switzerland-based oil risk consultancy PetroMatrix, said.
Fear that the United States will run out of space to store its oil was what led WTI to plunge to subzero prices last week, for the first time in its 37-year history.
While WTI is used by major funds and investors seeking exposure to US crude oil in their portfolios, Monday’s sell-off was exacerbated by the United States Oil Fund, an exchange-traded fund known as USO and popular with retail investors. The administrators of USO unexpectedly moved to sell all the fund’s holdings in WTI’s front-month contract, June, so that they could move its money to the nearby July contract, which was at less risk to storage threats when it comes up for expiry in about seven weeks. June WTI settled at a discount of more than $5 per barrel to July WTI on Monday's close, after the shift by USO.