March 23, 2020 [ET Energy World] – The largest oil supply surplus the world has ever seen in a single quarter is about to hit the global market from April, creating an imbalance of around 10 million barrels per day.
The global oil storage infrastructure is in trouble and will be unable to take more crude and products in just a few months, according to a latest analysis by Oslo-based research and consultancy firm Rystad Energy.
It said the largest oil supply surplus the world has ever seen in a single quarter is about to hit the global market from April, creating an imbalance of around 10 million barrels per day (bpd).
The current liquid balances show supply surpassing oil demand by an average of nearly 6 million bpd in 2020, resulting in an accumulated implied storage build of 2.0 billion barrels this year.
“We find that the world currently has around 7.2 billion barrels crude and products in storage, including 1.3 billion to 1.4 billion barrels currently onboard oil tankers at sea. We estimate that, on average, 76 per cent of the world’s oil storage capacity is already full,” the firm said.
There is essentially no idle storage capacity available on tankers, as Saudi Arabia and other producers might have already wiped out the available population of Very Large Crude Carriers (VLCC) for March and April 2020.
Rystad Energy’s data shows the theoretical available storage capacity at present is just 1.7 billion barrels onshore for crude and products combined. Based on the estimate of an average of 6.0 million bpd of implied oil stock builds for 2020, in theory, it would take nine months to fill all onshore tanks. However, in practice the ceiling will be hit within a few months due to operational constraints.
“The current average filling rates indicated by our balances are unsustainable. At the current storage filling rate, prices are destined to follow the same fate as they did in 1998, when Brent fell to an all-time low of less than $10 per barrel,” says Paola Rodriguez-Masiu, Rystad Energy’s Senior Oil Markets analyst.
Floating storage normally uses VLCCs, which can carry about 2.0 million barrels. There are about 802 VLCCs active globally with a combined capacity of 250 million deadweight tonnage (dwt), capable of collectively storing 1.8 billion barrels. The entire global fleet, including smaller Suezmax and Aframax vessels, is estimated to have a combined capacity of 630 million dwt or 4.6 billion barrels.
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