American pipeline operators have begun asking oil producers to voluntarily ratchet back their output in the clearest sign yet that a growing glut of crude is overwhelming storage capacity. Plains All American Pipeline LP, one of the biggest shippers of crude in the U.S., sent a letter this week asking its suppliers to scale back production. The notice came from the company’s marketing unit that buys and sells oil to customers. A Texas oil regulator said Saturday that drillers were getting similar notices from pipeline operators.
The messages signal the oil market is fast approaching the moment traders have been warning about — when crude supplies overflow storage tanks and pipelines as the coronavirus pandemic drags down oil demand by the most in history. “We are sending this proactive request to our suppliers to ask that you take steps to reduce oil production in response to the pandemic,” Houston-based Plains said in the letter obtained by Bloomberg.