The historic OPEC + production reduction agreement may have prevented a total disaster in the oil market, but it will not be able to prevent the imminent build-up of world oil stocks which threatens to fill all available storage around the world over the next few weeks. The International Energy Agency (IEA) said on Wednesday.
“The oil industry has never before been so close to testing its logistical capabilities to the limit,” the agency said in its April oil market report.
According to the IEA, the loss of demand due to the coronavirus pandemic could lead to a stockpiling of 12 million barrels per day (b / d) in the first half of 2020, despite the decision of OPEC + to reduce production collective of 9.7 million b / d in May and June.
The glut “still threatens to overwhelm the logistics of the oil industry – ships, pipelines and storage tanks – in the coming weeks,” the Paris-based agency said in the report.
Globally, global storage capacity could be exceeded by the middle of this year. Yet there are already signs of logistical tensions in many parts of the world and in other parts of the supply chain, such as competition for space on the pipeline networks. At many sites, it is not possible to store different grades of crude oil, while some crudes and petroleum products require special tanks for storage, the IEA said.
Offshore, traders are rushing to reserve floating storage, and charter rates for supertankers are skyrocketing, the agency noted.
Storage costs are skyrocketing, as are the costs of chartering tankers to store oil offshore for future sales, when traders expect demand to recover from the fall of the pandemic.
One factor that could alleviate the glut and “create additional margin for the impending inventory buildup” is the fact that China, India, Korea and the United States “have either offered their strategic storage capacity to the ‘Industry to temporarily park unwanted barrels, either plan to increase their strategic stocks to take advantage of lower prices,’ said the IEA.
By Tsvetana Paraskova for Oilprice.com
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