The flood of oil will likely take crude prices “well below” $20 a barrel, experts say.
A fast-rising tide of crude oil — courtesy of a plunge in demand due to the global COVID-19 pandemic and an ill-timed price war between Russia and Saudi Arabia — is filling up storage tanks around the world and putting a strain on the global refining system.IHS Markit estimated in a Thursday report that the global oil market is headed for a first-half 2020 surplus of 1.8 billion barrels, exceeding the top end of the advisory firm’s estimate of available crude-oil storage capacity of 1.
The main driver for the surplus comes from the unprecedented collapse in global demand as major economies curtail activity on a massive scale in an effort to slow the spread of COVID-19. International Energy Agency head Fatih Birol on Thursday told an online forum that with the pandemic shutting in around 3 billion people around the world, crude-oil demand was set to plunge by 20 million barrels a day in the first half of 2020, according to news reports.
A backlog of energy products has seen fuel-storage costs soar in recent weeks. Crude will see similar logistical storage constraints as supplies swell, the Goldman analysts said.
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