The global oil market is broken, overwhelmed by an unmanageable surplus as virus lockdowns cascade through the world’s largest economies.
The global airline industry is grounded, countless businesses and factories are shuttered and billions of people have been forced to stay home. For those with access to the coast, one solution is to use the supertanker fleet as floating storage tanks, and that’s happening at an unprecedented rate. The CEO of the world’s largest tanker owner, Frontline Ltd., said on Friday that he’d never known such demand to hire ships for long-term storage. Traders could put 100 million barrels at sea, he estimated, but even that accounts for just a few days’ oversupply.
As for gasoline, American drivers are the single biggest source of demand, using more than 9 million barrels a day, according to the Energy Information Administration. As whole states, including California and New York, have told people to stay home, billions of car journeys have been lost. It’s a pattern repeated in Europe and Asia.
As the refining system withers, the crude oil market is suffering. Many crudes, especially sticky, sulfurous grades that refiners find hard to process, trade at hefty discounts to international benchmarks. Western Canadian Select, a tarry blend squeezed from Alberta’s oilsands, reached a record low of US$4.51 a barrel on Friday.
The surprise, perhaps, is that benchmark futures are still trading as high as they are. Brent, the North Sea grade that sets the price for about two-thirds of the world’s oil, ended last week at US$24.93 a barrel, well above the historic low of US$9.55 a barrel in 1998.
Yet.....
Not global, Western
Send it my way.