In the wake of the deadly coronavirus pandemic, the economy, in general, has been hit terribly. According to experts, in a few weeks, global oil storage can reach its maximum capacity.
In a report published by CNBC, energy analysts have said that a situation like global oil storage reaching its maximum capacity in a few weeks can arise. Reasoning it they said the COVID-19 crisis has hugely reduced the consumption.
Due to the pandemic, many countries have had to adapt strict measures including a complete lockdown, which has affected the lives of billions of people.
The report adds that due to this an unprecedented demand shock has been created in energy markets. As a result storage space both onshore and offshore is quickly running out.
Moreover, a three-year pact between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC partners to curb oil output also ended on Wednesday. This will now make way for oil producers to ramp up production.
Saudi Arabia has pledged to hike output to a record high. Bjarne Schieldrop, chief commodities analyst at SEB told CNBC, “Refineries in many places are now losing money for every barrel they process, or they have no place to store their output of oil products”.
He also alerted that when refineries are shut down, the majority of oil producers have no place to send their crude oil. Substantiating his stance he added, “For land-based or land-locked oil producers, this means only one thing. The local oil price or the well-head price they receive very quickly goes to zero or even negative, because if they have too much oil, they must pay someone to transport it away until they have managed to shut down their production”.