The world could run out of oil storage capacity within months, according to the biggest energy traders, as the coronavirus pandemic crushes demand for fuel at the same time as the Saudi-Russia price war boosts supplies. Traders are predicting oil demand could fall at the fastest pace on record, as entire industrialised countries go into lockdown and major cities such as London and New York take drastic measures to try to slow the spread of the virus. For those renting out storage tanks or snapping up cheap oil with an eye on selling it at a profit later, this is a gift. But the oil industry’s capacity for storage is likely to be tested like never before, and prices may have to fall further to force the closure of oilfields.
“Something will have to give,” said Torbjorn Tornqvist, chief executive of Gunvor. “The world is producing too much oil.” Traders such as Gunvor are predicting demand could fall by at least sm barrels a day in April – the equivalent of 5 per cent of global demand – as nations grapple to control the virus. At the same time, supply from Saudi Arabia is expected to jump by about a quarter, with Russia and the UAE also increasing output, amid a battle for market share stemming in part over disagreements over how to respond to the crisis. In total that could take the surplus to at least 8m barrels per day.
‘W‘e are not there yet but we are not going to have any space onshore and it will be hard to find any storage on water. Therefore, the price will have to fall to motivate someone to cut production
Giovanni Serio, head of analysis at Vitol
But as the economy slows, many traders are starting to say that number could rise sharply. Eurasia Group, a consultancy, said global demand could drop by a quarter, or 25m barrels a day, at various points this spring.
Already, owners of onshore tank farms are fielding calls from traders looking for storage to keep oil that they snapped up as crude prices more than halved from $70 a. Eelco Hoekstra, chief executive ofVopak, one of the world’s largest onshore oil tank companies, said he had seen “an increase in the number of inquiries for storage of crude oil and oil products in our global network”.