Oil prices could soon turn negative as the world runs out of places to store crude, analysts warn

Global oil storage could reach maximum capacity within weeks, energy analysts have told CNBC, as the coronavirus crisis dramatically reduces consumption and some of the world’s most powerful crude producers start to ramp up their output. The coronavirus pandemic has meant countries have effectively had to shut down, with many governments imposing draconian measures on the daily lives of billions of people. It has created an unprecedented demand shock in energy markets, with storage space – both onshore and offshore – quickly running out. At the same time, a three-year pact between OPEC and non-OPEC partners to curb oil output ended on Wednesday, paving the way for oil producers to ramp up production. OPEC kingpin Saudi Arabia has pledged to hike output to a record high. “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,” Bjarne Schieldrop, chief commodities analyst at SEB, told CNBC via email this week. He pointed out that when refineries shut down, many oil producers have nowhere to send their crude if the refinery is also part of the logistical chain to the market. “For land-based or land-locked oil producers, this means only one thing,” Schieldrop continued. “The local oil price or 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.”...MORE