Oil prices have edged-down on fears over worldwide oil storage capacity, leading to increase in concerns that output cuts by major producers will not be fast enough to fully offset the fuel demand collapse from the Covid-19 pandemic.

According to Reuters, Brent crude (LCOc1) trading was down $0.44 to $21.00 a barrel, while West Texas Intermediate (WTI) futures fell $1.49 to $15.45 a barrel at 0452 GMT.

Mitsubishi Tokyo senior risk manager Tony Nunan said that the June WTI contract’s price fall may have been sparked by investors moving to later months to avoid a similar fate.

Nunan further added: “Anybody who has had length who doesn’t have storage contracts has either closed their positions (in June) or rolled far forward … because it’s suicide to carry a position into the close after seeing what happened last month.”

Oil storage at Cushing, Oklahoma, which is the delivery point for the US WTI, was 70% full as of middle of this month and is expected to be full within near term.

Data released by Baker Hughes has revealed that rig counts in the US declined to the lowest since July 2016, while the total number of oil and gas rigs in Canada has fallen to the lowest in two decades.

ANZ analysts said: “The Permian Basin and New Mexico accounted for 62% of the shutdowns; an ominous sign considering this region has been one of the more prosperous in the US.”

OPEC producing nations Kuwait and Azerbaijan are coordinating cuts, while Russia is all set to reduce western seaborne exports by half next month.

Production cuts from OPEC+, a group including OPEC countries and other oil producing nations such as Russia, will be effective 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 the virus outbreak.