The world is awash in crude oil, and is slowly running out of places to put it as global oil storage tanks have been stretched beyond their capacities. This is caused by the price and production war between Saudi Arabia and Russia, exacerbated by current low oil demand due to COVID-19.
Massive, round storage tanks in places like Trieste, Italy, and the United Arab Emirates are filling up. Over 80 huge tankers, each holding up to 80 million gallons, are anchored off Texas, Scotland and elsewhere, with no particular place to go.
This chaotic mismatch in supply and demand has benefited consumers, who have watched gasoline prices slide lower.
The world doesn’t need all this oil. The coronavirus pandemic has strangled the world’s economies, silenced factories and grounded airlines, cutting the need for fuel. But Saudi Arabia, the world’s largest producer, is locked in a price war with rival Russia and is determined to keep raising production.
“For the first time in history we are seeing the likelihood that the market will test storage capacity limits within the near future,” said Antoine Halff, a founding partner of Kayrros, a market research firm. As storage space becomes harder to find, the prices, which have already fallen more than half this year, could drop even further. And companies could be forced to shut off their wells.
And it has been a field day for anyone eager to snap up cheap oil, put it someplace and wait for a day when it’ll be worth more.
While the coronavirus epidemic threatens to bust parts of the United States oil industry, Mr. Barsamian’s business, which finds places to park unwanted fuel, is thriving, at least for now.
“We usually do about two storage deals a day,” said Mr. Barsamian, who runs a company in Princeton, N.J., called the Tank Tiger, a nod to the local university’s mascot. “We have done about 120 in the last couple of weeks.”
Mr. Barsamian matches clients like commodity traders or refiners that have oil they want to store with tank farm owners and others who have places to put it, collecting a fee of 1 cent per barrel a month from the latter.
People in the energy industry say they have never seen changes happening at the speed and magnitude that are occurring because of the coronavirus.
-NYT