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US oil drops steeply below $15 per barrel

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US oil prices on Monday plummeted, hitting below $15 a barrel on renewed storage concerns as the coronavirus throttles demand even as producers start slashing output to boost markets.

American benchmark West Texas Intermediate dropped 15 percent to $14.39 a barrel in Asian afternoon trade, reversing direction after several days of gains last week.

Brent crude, the international benchmark, was off nearly six percent at $20.16 a barrel.

Oil prices have collapsed in recent weeks as demand evaporated because of lockdowns and travel restrictions imposed worldwide to fight the virus.

Top oil producers have agreed to cut output by 10 million barrels a day from May to shore up markets, a deal that marked an end to a price war between Russia and Saudi Arabia.

Last week, US oil fell below zero for the first time as investors scrambled to offload it before the expiry of a trading contract, but could not readily find buyers.

Prices have recovered since, but remain at their lowest levels for years.

A key worry for traders is that storage facilities — particularly in the United States — cannot cope with the oversupply.

“Concerns surrounding rising global inventories, especially in the US with the coronavirus pandemic weighing on gasoline consumption, are pressuring oil prices,” said Kim Kwangrae, a commodities analyst at Samsung Futures Inc.

The oversupply could test storage capacity limits in three to four weeks as tanks fill up, Goldman Sachs warned in a report.

The continued concerns about storage overshadowed signs that some countries — including Kuwait and Algeria — are starting to slash production in line with a major agreement hammered out this month.

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