Oil market faces storage crisis in a world awash with crude

Plummeting demand during the coronavirus pandemic has left traders scrambling for ships and other alternative facilities.

upergiant oil tankers are floating outside the world’s largest shipping ports with enough oil to meet the world’s daily demand twice over. Only months ago these vessels criss-crossed the globe laden with up to 2 million barrels. Today they stand motionless and bloated with crude that no one will buy.

The record volume of stranded crude cargo illustrates a deepening crisis in the global oil industry. Demand for oil has fallen so severely, and at such pace, that there is little space left on land to store the crude made redundant by the coronavirus crisis. At least 160 million barrels are now stored at sea, outside global shipping ports from Singapore to Suffolk and along the US gulf coast as oil traders brace for storage facilities to reach capacity imminently.

Market forecasts suggest that the world’s conventional oil storage – which can hold about 3.4 billion barrels – will be filled to its limits within the next month. In the meantime, oil traders are turning to alternative storage options: supergiant tankers, rail freight carriages and even underground salt caverns have become sought-after havens to stash millions of barrels of surplus crude.

“It feels like high noon on oil markets,” says Norbert Rücker, an analyst at private banking group Julius Baer. “Storage close to capacity limits, rapidly filling up, creates a blistering tension filled with fear about an overflowing oil market.”