Global oil benchmark Brent crude plunged to its cheapest in 18 years on Monday, while US crude briefly tumbled below $20 per barrel, on heightened fears that the global coronavirus shutdown could last months and demand for fuel could decline further.
The market extended losses after data provider Genscape reported that US stockpiles at Cushing in Oklahoma rose more than 4 million barrels last week, which was the biggest-one week increase in more than 10 years.
With Saudi Arabia and Russia set to flood the market with oil next month, producers and shippers have been scrambling to lock oil up in storage as demand falls due to the coronavirus pandemic.
Brent futures fell $2.43, or 9.8%, to $22.50 a barrel by 10:40 a.m. EDT (1440 GMT), while US West Texas Intermediate (WTI) crude fell $1.22, or 5.7%, to $20.29.
Earlier in the session, Brent fell as low as $21.76 per barrel, its lowest since March 2002, while WTI dropped to $19.85. A couple weeks ago, WTI fell as low as $19.46, its lowest since February 2002.
The dual shocks of the price war and the demand slump on the pandemic has kept oil prices under pressure, with the major benchmarks recording losses for five straight weeks.
The price of oil is now so low that it is becoming unprofitable for many oil firms to remain active, analysts said, and higher-cost producers will have no choice but to shut production, especially since storage capacities are almost full.
"Global oil demand is evaporating on the back of COVID 19-related travel restrictions and social distancing measures," said UBS oil analyst Giovanni Staunovo.
Rystad Energy's head of oil markets, Bjornar Tonhaugen, said: "The oil market supply chains are broken due to the unbelievably large losses in oil demand, forcing all available alternatives of supply chain adjustments to take place during April and May."
These included cutting refinery runs and increasing onshore or offshore storage, he said.
Supertanker freight rates are rising for a second time this month as traders rush to secure ships for storage.
Goldman Sachs analysts said demand from commuters and airlines, which account for about 16 million barrels per day of global consumption, may never return to previous levels.
Besides the demand shock, the oil market is also under pressure from a price war between Saudi Arabia and Russia, after the collapse earlier this month of a three-year deal to limit supply between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Moscow.
US President Donald Trump said he planned to speak with Russian President Vladimir Putin on Monday.
He said that Saudi Arabia and Russia "both went crazy" following the collapse of the deal to cut output, as oil prices were pushed down by an economic slowdown caused by the need to slow the spread of the coronavirus.
Saudi Arabia said on Monday it plans to boost its oil exports to 10.6 million bpd from May.
"This game of attrition is likely to drag prices even lower and even a price of $10 per barrel is no longer unimaginable," said Hussein Sayed, analyst at FXTM.