U.S. crude costs plunged in afternoon Asian commerce on Monday as merchants continued to worry over a droop in demand because of the coronavirus pandemic — and one analyst described the situation stateside as “quite dire.”

Costs on the Might contract for West Texas Intermediate crude futures tanked by nearly 19% to $14.84 per barrel. Earlier on, WTI had fallen to $14.47 per barrel, its lowest degree since mid-March 1999 when it traded for as low as $14.40 per barrel. In the meantime, worldwide benchmark Brent crude futures edged 2.42% decrease to $27.40 per barrel.

ANZ’s Daniel Hynes instructed CNBC’s “Squawk Box” on Monday that one of many causes behind the “crater” in U.S. crude costs was the approaching expiration of the Might futures contract, set to occur on Tuesday, in accordance with Refinitiv. The June WTI contract fell about 6% to $23.57 per barrel.

Entrance month futures contracts sometimes converge with spot costs as they close to expiry.

“There will be traders in the market who only want to trade the paper, so they will roll over into the next futures contract. That means selling the May contract and buying the June,” Hynes, who is a senior commodity strategist at ANZ, instructed CNBC in a follow-up e-mail change.

“But there are also traders who are buying for clients who trade the physical. So they hold the contract to expiry and deliver the crude,” or settle for the crude if they’re on the opposite facet of the commerce, he stated.

This might be why there is a steeper fall within the Might futures contract in comparison with the June contract. Spot costs are “particularly weak” in the meanwhile, Hynes stated, including that spot U.S. crude is buying and selling for as low as $12-13 per barrel. This was attributable to a mixture of a “collapse in demand and a subsequent lack of storage,” he stated.

In a traditional market, the unfold between the spot worth and the one month ahead futures contract “may only be around 40-50 cents per (barrel),” he stated. “At the moment, it’s been as high as $8-10 (per barrel).”

Hynes stated that costs are prone to “remain under pressure” over the following month or so.

The coronavirus pandemic has dealt a extreme blow to financial exercise across the globe and sapped demand for vitality. Whereas OPEC and its oil producing allies finalized a historic agreement earlier this month to chop manufacturing by 9.7 million barrels per day, the Worldwide Power Company has warned that the cuts might not be sufficient to offset a severe plunge in oil demand.

With demand at near-paralysis, oil and gasoline tanks world wide are near brimming — a stark proof of the worldwide glut and a perform of the “contango” construction of the futures market, the place contracts for later supply commerce at a premium to the front-month. 

That is led to a touch by merchants to lease floating or onshore storage in a bid to promote the gasoline for a revenue when costs rebound.

International oil storage is “rapidly filling – exceeding 70% and approaching operating max,” Steve Puckett, govt chairman of TRI-ZEN Worldwide, an vitality consultancy, told CNBC earlier this month.

— CNBC’s Sri Jegarajah contributed to this report.