Lockdown measures are crippling demand, and supply isn’t falling quickly enough to keep up. Oil-storage tanks around the world are rapidly filling with crude, leaving the new production coming out of the ground with nowhere to go. The overwhelming glut is threatening one of the world’s vital industries and could prolong the economic fallout from the coronavirus. As storage filled, one price for U.S. crude recently fell below $0 a barrel—a first in oil-market history—effectively meaning sellers would have to pay buyers to take barrels off their hands.
Even with a recent rebound as parts of the world reopen for business, oil trades at a fraction of where it started the year. U.S. crude futures closed down 1.8% at $23.55 a barrel Thursday, extending a streak of wild moves by erasing an earlier 11% rally. Most energy companies would lose money producing at these levels. Stockpile data are incomplete or delayed, but recent figures already illustrate the crisis.
Notes: Geographic regions reflect the five Petroleum Administration for Defense Districts; total inventory includes stocks held in pipelines and in transit.
Source: Energy Information Adminstration
Global oil inventories fall into two main categories: commercial stockpiles and strategic reserves held for emergencies. Most investors focus on changes in commercial inventories because those are most sensitive to shifts in global supply and demand.