The world is currently have excess quantity of course oil and this results in a slow but steady lack of places to store it.
Massive and really large tanks used in storing crude oil in places like United Arab Emirates and Italy are filling up. Over 90 huge tankers,each containing about 86 millions gallons are sent off to Scotland and elsewhere,with no particular place to go.
Places like Saudi Arabia are currently preparing to increase it fossil fuel production event with the fact that global demands for crude oil continues to fall especially due to the covid-19 pandemic.
“Prices have drastically reduced”
This mismatch in supply and demand has really benefited consumers as the prices have had to slide lower and for anyone trying to get cheap oil,put it someplace and wait for a day when it will be worth more. As the storage space is becoming harder to find,prices which have already fallen more than half this year already,could drop even further,which could lead to companies shutting down their wells.
The current price war between Russia and Saudi Arabia has made the situation a lot worse as the Saudis have been forced to slash down their prices and making threats to ramp up oil output.
The global oil price fell to $25 a barrel last week,from more than $65 at the start of the year and still remains below $30 a barrel and with the current oil price war the world’s oil production will rise by more than 2.5 barrels of oil a day,which will lead to an outpace demand for crude oil.
“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”,said Rystard Energy analyst Poala Rodriguez Masiu. The crude oil storage space running out is affecting different countries as even Nigeria has had to reduce the price of fuel from 145 naira to 125 naira. As a result of lack of storage space Nigeria has had to reduce its budget as the country was banking hope on the sales of crude oil.
“Covid-19 Pandemic”
The first major down turn in demand occurred in February when China,the world’s largest energy consumer,shut down turn of it’s economy in an effort to stabilize the spread of corona virus. The global oil demand has had to reduce drastically as the impact of the covid-19 spreads around the world,constricting travel and border economic activities.
The covid-19 crisis is affecting a wide range of energy markets including coal,gas and renewables but the impact it has on oil markets has been particularly severe because it is stopping people and goods from moving around thereby having a heavy blow to demand for transportation fuels.
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The impact of the corona virus on oil markets maybe temporary but the longer term challenges facing the world’s suppliers are not going to go away,especially those heavily dependent on oil and gas revenues.
The world does not need all this oil and the corona virus pandemic has really strangled the world’s economies,silenced factories and grounded airlines,cutting the need for fuel.
In theory the world’s storage space is running out and added with the covid-19 outbreak prices of crude oil might keep sliding down
