World oil storage facilities may overflow in coming months

Energy experts fear that global oil storages may overflow during several months due to falling demand for oil because of coronavirus. Forecasts suggest a sharp drop in oil demand, as industrialized countries are isolated, and large cities are taking decisive measures in an attempt to slow the spread of the virus.

Traders such as Gunvor predict that oil demand may fall by at least 5 million bpd (5% of global demand) in April when the OPEC + agreement ends.

At the same time, the price war between Russia and Saudi Arabia will only increase the excess supply of oil on the market. It is expected that oil supplies from Saudi Arabia will grow by about a quarter, while Russia and the UAE are increasing production volumes amid a struggle for market share. In total, this may lead to a supply surplus of at least 8 million bpd.

Consulting Eurasia Group estimated that global oil demand could fall by a quarter or 25 million bpd in spring. According to analysts, the occupancy rate of onshore oil storage facilities is now 61%, and in six months they can exhaust their capacity. In this case, traders will be forced to switch to a more expensive option for storing oil – on tankers at sea.