WHEN SUPPLY OUTSTRIPS DEMAND

Kpler’s Alex Booth looks at how the global crude crisis in 2020 came about, how it affected storage and the direction of the trends now. THE BUILD-UP TO THE GLOBAL CRUDE OVERHANG – A PRICE WAR COMPOUNDED BY COVID-19 The build-up to the global crude crisis started long before COVID-19 decimated demand. OPEC+ had been cutting output since 2016 to try and limit the slide in oil prices brought about from the rise of US shale oil production. As US production continued to grow and the coalition continued to lose market share, tensions frayed as to the best approach to combat the threat. The breakdown in relations between Saudi Arabia and Russia came to a head in spring of this year as their production cut agreement came to an end just as the impact of the pandemic was hitting full swing. With the taps opening from 1 April 2020, the scene was set for the perfect storm of overproduction at the same time as the most severe demand curtailments ever witnessed. NET LENGTH BUILDING IN THE CRUDE MARKETS In the six months leading up to April 2020, global waterborne crude exports averaged 42.5 million bpd, off the highs of 2018 but a significant increase on the 39.1 million bpd of...