March 2020, when life as we know it stopped in the US, the production of crude oil kept on pumping. This continual pumping has led to a crude oil surplus, and in April when the demand for oil waned, the need for storage increased. As storage option are finite and they began to get full, according to David Deckelbaum, an oil analyst with the investment bank Cowen, “oil companies had to start getting creative as they were unable to continue to store or sell the oil. It was said some companies went bankrupt, while others bought oil tankers and pushed them out to sea, completely full. “
Global supply and demand are also in a state if imbalance. Countries who have historically been takers of crude have seen major shortages in demand and have filled their storage as well. China is finding itself in a similar situation with their storage tanks getting dangerously close to being full. The problem continues to compound as they are receiving oil shipments that were purchased in April and May.
Storage shortages will provide an interesting wrinkle to the supply and demand picture. As prices continue to take large swings on every news headline it will be interesting to see when storage plays are liquidated into the market.