OPEC+ has agreed to cut output by a record 9.7 million barrels per day in May and June. Credit: faungg’s photos.

Oil prices fell on Monday due to concerns US storage facilities would soon be filled. The Covid-19 pandemic has crushed fuel demand, leading to increasing oversupply worries.

Investors are also preparing for oil and gas producers to report their worst quarterly earnings since the 2008 financial crisis, which also contributed to the drop in prices.

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Brent crude dropped by $0.73 to $27.35 a barrel, while US West Texas Intermediate (WTI) crude fell $3.53 to $14.74 per barrel, reported Reuters.

According to the news agency, the US crude dropped by 21% to $14.47 a barrel at one time, which is its lowest since 1999.

Oil storage at Cushing, Oklahoma, which is the delivery point for the US WTI contract, is said to be soaring as refiners throttle back activity due to fragile demand.

Furthermore, floating storage in tankers is estimated another 160 million barrels.

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ING commodities strategy head Warren Patterson said: “The May contract is set to expire tomorrow, and the bulk of the open interest and volume is already in the June contract.”

Meanwhile, the June contract, which is more actively traded, fell $1.45, to $23.58 per barrel.

Rystad Energy oil markets head Bjornar Tonhaugen told Reuters: “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.”

Production cuts from OPEC+, a group including OPEC countries and other oil producing nations such as Russia, will take effect from next month.

The group has agreed to cut output by a record 9.7 million barrels per day (bpd), to counter the collapse of prices due to coronavirus outbreak that shred the demand.