The global oil market is broken, overwhelmed by an unmanageable surplus as virus lockdowns cascade through the world’s largest economies.
Onshore tanks in many markets are full, forcing traders to store excess oil in idle supertankers. Refineries are starting to shut down because nobody needs the fuels they produce. In physical oil markets, barrels are already changing hands for less than $10, and in a few landlocked markets producers are paying consumers to take away their crude.

“The physical oil market has seized up,” said Gary Ross, an influential oil watcher and chief investment officer of Black Gold Investors LLC. “The logistics are struggling to cope because we are facing a catastrophic loss of demand.”

Oil traders say it’s likely to get worse this week.

The root cause is an accelerating plunge in consumption that’s without precedent since a steady flow of oil became essential to the global economy more than a century ago. The great crash of 1929, the twin oil shocks of the 1970s and the global financial crisis don’t come close. The world normally uses 100 million barrels of oil day, and traders and analysts reckon as much as a quarter of that has disappeared in just a few weeks.

The global airline industry is grounded, countless businesses and factories are shuttered and billions of people have been forced to stay home.

“Demand clearly is off, in some parts of the world, very dramatically,” Chevron CEO Mike Wirth told Bloomberg TV.

The immediate problem is a lack of storage in the right places. With demand running 20 million barrels a day below supply, the world won’t have enough tanks to store the surplus in two or three months. But the issue is even more pressing because global tank capacity, mostly concentrated in a few hubs like Rotterdam, the Caribbean and Singapore, isn’t available to every producer. For those without access to pipelines and ports, local storage will run out in days, traders and consultants say.

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.

In the U.S., one of the largest pipeline companies, Plains All American Pipeline LP, has asked oil producers to voluntarily cut output to avoid overwhelming the network that connects well heads to refineries through thousands of miles of pipelines.

The world is running out of places to put oil because the shutdown of vast swathes of the economy has been catastrophic for demand. The collapse in commercial air travel has cut jet fuel use by up to 75%, or almost 5 million barrels a day.

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.

“Demand destruction is unprecedented,” said Ben Luckock, co-head of trading at Trafigura Group, the second-largest independent oil trader. He estimates the hit to consumption will total 22 million barrels a day in April.

Around the world, about 700 refineries turn crude oil into gasoline, diesel and other fuels. They are starting to dial down production and even shut outright because demand for the fuel they produce is so dire. In India, for example, where 1.3 billion people are under lockdown until mid-Aptil, the nation’s biggest refinery has cut processing rates at most plants by as much as 30%.

A small refiner in Italy, the epicenter of Europe’s virus outbreak, shut on Friday because demand for fuel plunged 85%.

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 oil sands, reached a record low of $4.51 a barrel on Friday.

In the U.S., Oklahoma Sour is changing hands at $5.75, Nebraska Intermediate at $8, while Wyoming Sweet prices at $3 a barrel.

In one obscure corner of the American crude market, prices have already turned negative. Wyoming Asphalt Sour, a dense oil used mostly to produce paving bitumen, was bid at minus 19 cents a barrel in mid-March by Trading Mercuria Energy Group Ltd.

Read: One Corner of U.S. Oil Market Has Already Seen Negative Prices

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 $24.93 a barrel, well above the historic low of $9.55 a barrel in 1998.

Luckock at Trafigura says future prices are likely to fall another $10. Black Gold’s Ross also says Brent and the U.S. benchmark, West Texas Intermediate, will be trading in the teens within days.

The next stage of the oil market’s meltdown will be widespread production shutdowns as drillers decide the only option is to leave it in the ground until better days return. There are signs this is starting to happen.

Brazil’s state oil company Petrobras has announced it will reduce output by 100,000 barrels a day this year because of the lack of demand. In Canada, some producers have shut down output, and Glencore Plc., the world’s largest commodity trading house, has shut down its production in Chad.

Read more: Oil Industry Braces for Biggest Idling of Wells in 35 Years (1)

Many producers are reluctant to shut wells because even though they’re losing money at today’s prices, some cashflow is often better than none at all. But as more refineries idle, the pipeline system grinds to a halt and storage tanks fill to the brim, they will soon have no choice.

“The problem is no one wants to be the first to shut-in,” Black Gold’s Ross said.

Maybe folks will learn, especially here in the US , that they don't need so much 'stuff ' to survive.

This is a nightmare for the Demonrat party,cheap gas. LOL

Wifey is in the oil business. This isn’t good news.

It's not just because of the coronavirus shutdown. Russia and Saudi Arabia are in price war and both pumping far more oil than needed, that's the main reason oil prices are plummeting.

Glad I'm not in the oil business or holding oil stocks.
Though with Vanguard Energy ETF dropping like 60% I have considered buying some.

A perfect storm

No. It isn't.


The economic repercussions will be felt for a long time on this.

It's always been boom or bust in the oil business, but this bust doesn't come at a good time at all.

If it goes on for another year, you’ll see one of two things happen. All the debt saddled companies who’ve been drilling unconventionals the last ten years will be bankrupt. The super majors (shell, BP, Exxon, Chevron) will purchase all of it for pennies on the dollar. Or the government will sweep in and purchase the distressed assets as a form of bailout for the industry. Then nationalize the production.

I'm ready for 99.9 per gallon. And I want it to stay that way for 2 years. Be Well, Rustyzipper.

The way things are going that could very well happen, but I don't think we will see 24.9 like it was back in the good ole days.

I can see summer fun with the boat being really cheap.
My boat holds 70 gallons !

Sorry, but I quit moving rigs 6 years ago, and dont miss it one bit.
The ups, the downs, the 100 hour weeks, the loss of having a life, the missing of special days, etc.

50 cent a gallon gas !
You betcha !

How bout diesel prices??
I can see souping my power stroke up, or buying a real cheap new, Ford F350 !!

We should be filling the Strategic Reserve. But, thanks to demon-crats that won't be happening.

It'll happen.
Trump will figure out something.

Dosent it seem to anyone but me how coincidental the Saudi and Russian oil spat was perfectly timed with C19 blooming worldwide.
Naw......
They couldnt be in cahoots with the chinese to crush the U.S economy and get a patsy liberal socialist democrat in office.
Just cause President Trump stood up to em all....


My 2nd kook of the day post on this basic overall subject line.

I wish more would catch on.

"The cure for low prices is low prices, the cure for high prices, is high prices."

Too many taxes on gas to go below a dollar.

The democrats will add more while it's low, if we let them.

We let the domestic producers ho down, we will pay this savings back in spades down the road. I'd much rather pay $3/gal and keep our boys pumping.

To put it where?

Oil is done for 2020.

when it gets to $2 a gallon in Flagstaff, AZ I'll believe it.

The Libtard motto..........Whatever It Takes

Oklahoma City has 87octane for $.99

State and Federal taxes are roughly 40cts/gallon on gasoline, depending on the State. Fed tax is 20cts/gallon by itself.

That's exactly what's coming. With reduced consumption the socialist States will need to offset the revenue loss, and guess what? They'll double the taxes "just for now" during the emergency. All "just for now" tax increases are just forever.

holy schidt! we're right down I-40! maybe it's on its way!

$2 in tucson, $1.65 at Sams club and costco

We get hosed out here. Our cut-rate stations are still charging $2.60-$3.10. They'll keep the price up to offset the loss of business. I'm cleaning up my bulk tank, installing a new hose, and calling the bulk supplier.

Besides, having my own gas station here on the place is good for social distancing, no more running to Skip's Market to fill up.

Agreed 100%.

I read an article recently which stated that the break ever for a barrel of oil for Russia is $20. The break even for OPEC nations is $85.

Russia has always cooperated with the OPEC nations in the past when they chose to slow production in order to maintain the price of oil.

The last time they asked, Russia said "no".

Safari, what are you paying per gallon for bulk?

Regular gas here is $1.42 and diesel can be had for $1.98.

OPEC nation’s break even at 85$/bbl sounds waaayy off.

I'll find out tomorrow. It's been four years since I bought bulk, and that was mostly Diesel.

If I buy 500 gallons now you can bet that next week it'll be $0.50/gallon cheaper. .

It’s $1.59 per gallon here in N TX.

I believe he is speaking in terms of fiscal break even for the OPEC nations, not production break even.

BTDT.

i think US and russia are $20, iraq iran and saudi are $10 , uk is $40

Has to be. Good point, Wolverine.

Call me selfish but I gave dearly 30+ years to a great company and am damn happy to be out of it collecting my pensions. I truly feel for those now impacted just as I was in my 30 years.

WTF ? how were you "impacted" ?

Living without family for months at a time for years in [bleep] holes given there was no work that allowed me in the US. You?

Lived on the road 5 days a week for 10 yrs ... for 50k a year... but I don't play the victim card... what a tool

They say this is a price war between the Saudis and the Russkies, but I see it as an attempt by both, colluding to put the US frackers out of business.

This

So did they hold a gun to your head? and were you compensated.... fuggin prick

Oh [bleep].....somebody wants to be thanked for their "service".... Nobody was lined up to give me condolences when the housing market [bleep] the bed in '08. We all live in a system that operates on boom/bust cycles. Enjoy the good times and make sure you save enough to drink your way through the down turns. If you don't have the stones to deal with that, get a job in the public sector. They're always hiring building inspectors and DMV clerks.

This fuggin douche loves to post how rich he is .... he was worth 8 million... well until his stock lost 30+ % poor victim.. it was so hard , cry me a fuggin river

First off, let me be clear that I am in no way claiming to be any kind of an expert in this field, but consider this: What if the U. S. put a high import fee on crude oil and refined products - and enforced it - to prop up domestic production? Don't get me wrong, I would love to pay around $1.00/gallon for gasoline retail, but our economy cannot stand the massive layoffs that this will cause in our domestic production. These oil companies cannot stay in business if they are not making a profit. If they close down, those workers cannot buy anything or pay their bills. If they cannot spend money on cars, clothes, restaurants, new TVs, washing machines, etc., etc., this will devastate our economy. A lot of people do not understand what a MAJOR impact this industry has on our economy. We are not just talking about a few hundred workers on a drilling rig here and there and a hundred or so in a refinery 2,000 miles away. Additionally, petroleum products are not just limited to gasoline, diesel, and jet fuel. Petrochemicals are used in everything from plastics to synthetic fibers to coatings, etc., etc. If the petroleum industry should collapse, it could be beyond devastating for the economy. Just my thoughts. Any expert opinions here? I hope I am way off base with this.

boat we fish in holds 500

Russian need hard currency, so they've been cheating on their production limits with Saudi's.

Along the way, the Saudi royal family created an extensive oil funded welfare state, and need to keep the checks flowing to maintain power. In an attempt to teach the Russians a lesson they are pumping at full rate, betting they have sufficient cash reserves to outlast the Russians, bringing them to heal. Sure they wouldn't mind putting a few U.S. out of business in the process, but that's not their primary objective.

Remember 2008 gas was $5.00, hard to feel sorry for them today......
Oh and I do understand the markets.. sorta , supply and demand should rule but I think when they could they manipulated the hell out of the markets.

Yep, I always read his posts in the voice of Mr.Howell on Gilligan's island. Pretentious prick.

My proline 2510 carried 200gal. Fuel was $4.00/gal after Katrina, and Everytime the wife was on board I'd only put 50gal in her at $200.00. She'd bitch about what I was paying to play and we'd all laugh knowing if she knew we were blowing $600 a trip out she'd probably kill me. Twin Yamaha 225 saltwater series II's were burning 1.5 gal a mile at W.O.T.

Russians needing hard currency ? wait until the Israeli gas pipeline to Europe comes on line.

yup running a 100+ miles offshore and trolling takes fuel, the cat we fish in has twin Yamaha 300 4 strokes.

What's the ETA on this project?

I need to catch up on it, JG. Haven’t looked in a while.

Some would say that it’s Armeggadon in the making. That’s one leg of the Russians’ 3 legged stool.

The ruskies and Saudis were in a price war months before this stsrted!,,!
My take and what I am doing is buying good oil companies.[ this to will pass.

If you think that this is the end of the world I can not help you
0because there is no help for you.

Do you have some photos of your Pro Line? I have a smaller one and love the boat. A 2510 would be about twice the size of my 221 WA; I need something trailer-able, and the 221 was as big as I could go realistically. Besides, it was priced real right by an owner in the middle of a divorce.

You're a good man and respect your drive and work ethic but many in the military did 3 to5 tours in Afghanistan and Iraq making a fraction of private sector pay, living in shcitty tents not Bechtel housing with servants, great food , and many came home severely injured mentally and physically.

I ve moved 16 times in my career but aint complaining as no one put a gun to my head.

For an oil state like AK, the low prices hit our state govt and discourage development by oil companies.

On the upside, we are no longer dependent on the sand monkeys for our energy needs. The other upside, is this might trigger an exodus from the state by people that have no long-term stake in the place and roll the population back to 600k or less.

I work in the in the Gulf of Mexico on an oil platform. As long as there is oil to produce in our wells we will keep them flowing. The government won't let us stop till the storage is full. The company can't just decide to stop on federal mineral leases. May not get a bonus this year though.
I have been through several downturns it will turn up eventually.

I love cheap gas!

It won’t last. Won’t be long and we’ll be getting raped at the pump again. Such is life.

I remember a time similar to this for oil in 1998. IIRC, the ragheads were trying to put offshore drilling out of business.

Did a little research and found the price traded down to $10ish per barrel back then. Adjusted for inflation that would be about $15 now...so that could potentially be where prices bottom out.

MMS needs that 1/6th royalty to run their business on. GOM production will get preferential treatment.

As discussed before, the big boys will buy existing fields from the leveraged companies and add proven reserves to their portfolios where synergies converge for them.

Don't underestimate their "love" for their neighbor's across the Gulf, Iran. There's some real hatred betwixt those two, and putting it to Iran has to have been part of the motivation. It's not just the US they are targeting. Other vulnerable producers are on the list, too, including the Africans, Venezuelans and Mexicans.

The present state of the oil market is the double whammy effect. Triple whammy, actually.

Price wars for market share, we’ve seen many times along with cheaters within and without OPEC, nothing new there.

Then, along comes the Co virus with the accompanying reduction in demand.

Perfect storm.

Throw in relative energy independence here in the USA and we’ve got what we’ve got.

Kind of where I was going with it. Interesting for sure.

Estimated 7 billion $ project with subsea being in 3 parts. Israel to Cyprus to Greece to Italy. Turkey will most likely be bypassed due to Russia’s influences there.

From Italy to points north and west.

Gas Sales Contracts are in place.

ETA:

Price/Bredero and Saipem are the designated pipe preppers and layers. That’s as of now.

US crude oil price falls below $20

Fall in demand due to virus creates surplus that risks overwhelming storage capacity

David Sheppard and Derek Brower in London 33 MINUTES AGOPrint this page253
US crude oil prices fell below $20 a barrel on Monday, close to their lowest level in 18 years, as traders bet production would have to shut to cope with the collapse in demand from the coronavirus pandemic.

The global oil industry is facing its biggest demand drop in history, with traders and analysts forecasting crude consumption could fall as much as a quarter next month because of widespread lockdowns across the western world as the pandemic spreads.

The US oil benchmark, known as West Texas Intermediate or WTI, hit a low of $19.85 a barrel, losing more than 7 per cent, before picking up to slightly above $20 in the European afternoon. Brent, the international benchmark, lost almost 13 per cent to hit a low of $21.76 a barrel, the lowest since 2002.

Oil prices have fallen more than half in the past month as widespread lockdowns in Europe and North America have slashed oil demand.

While demand has collapsed, the supply of oil has also increased rapidly because of the price war between Saudi Arabia and Russia. Saudi Arabia on Monday said it planned to raise exports even further, as its own domestic consumption drops during the pandemic.

Traders now believe the surplus could approach 25m barrels a day next month, a level that could overwhelm storage capacity worldwide within weeks.

“This is a historic oil price collapse, and it is not done yet as the system physically runs out of places to put all the oil,” said Jason Bordoff, a former energy adviser to the Obama administration and the founder of the Center on Global Energy Policy at Columbia University. “The pain in the shale patch is going to be severe. We will see production shut-ins accelerate.”

Prices are expected to remain under pressure until the market adjusts. Producers will probably be forced to close down output at a scale never seen in the modern oil industry.

WTI briefly traded below $20 a barrel this month as the April contract expired, dropping violently in thin trading. But Monday marks the first time WTI has traded under $20 a barrel since 2002 in normal trading conditions.


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Higher cost producers such as US shale and Canadian tar sands are broadly unprofitable at these price levels, although companies will hope other producers shut off production first.

The sheer speed and depth of the price fall, which has taken crude below the levels to which it plunged both in the last crash in 2014-16 and during the financial crisis, could force a quick reckoning in the industry. US energy producers already made the biggest cut to the number of drilling rigs operating in five years last week, according to data from Baker Hughes.

Analysts have calculated that the US oil industry, which expanded in the last decade to make America the world's top oil producer, could contract as much as 2.5m b/d by the end of 2021, from around 13m b/d of crude output now.

Other expensive production, from the North Sea to marginal fields in Asia, will also come under pressure. The largest oil companies have already announced reductions in capital expenditure or are studying plans to scale down.

Mathios Rigas, chief executive of gas producer Energean, said he expected weaker companies to struggle with many facing bankruptcy. “We're going to see a lot of shutdowns, delays in investment decisions,” said Mr Rigas.

“We are in a different world but there will be survivors”, he said, adding that some companies would see opportunities to invest as others scaled back.

The US has put pressure on Saudi Arabia to scale back its supply surge, but has made little impact. Saudi Arabia launched the price war this month after clashing with Russia over how to respond to the coronavirus-linked hit to demand. But increasingly it is the decline in demand that is worrying the oil industry, with airlines grounded, commuters working from home and factories shutting down.

Bjornar Tonhaugen, head of oil markets at consultancy Rystad Energy, said slumping global oil demand was the key factor in the drop in oil prices, overshadowing the effect of the Saudi-Russia price war. It is outweighing the supply increase “by a factor of 4-5”, he said.

“The oil market supply chains are broken due to the unbelievably large losses,” Mr Tonhaugen added. Refineries are cutting back on processing crude oil into fuel, and oil companies could start shutting down producing wells, he said.

https://news.yahoo.com/saudi-raise-oil-exports-record-levels-price-war-131947879.html

Saudi to raise oil exports to record levels as price war rages

Riyadh (AFP) - Saudi Arabia said on Monday it will raise its oil exports to a record 10.6 million barrels per day starting from May, escalating a price war with Russia.

Oil prices are languishing at 17-year lows as the coronavirus pandemic threatens a global recession that will send demand plummeting.

Saudi Arabia, the world's top oil exporter, which already announced a sharp production increase for April, said it will add additional supplies to the global market, deepening a glut.

"The kingdom plans to raise its petroleum exports by 600,000 bpd from May, so total exports will increase to 10.6 million bpd," said an official at the energy ministry, cited by the state-run SPA agency.

Saudi Arabia had been exporting around 7.0 million bpd under an output reduction agreement among a 24-member producers' alliance known as OPEC+ which included Russia.

Its Gulf neighbour UAE has also pledged to pump at least one million bpd more from next month.

Riyadh said earlier this month it was raising exports to 10 million bpd in April after a production cut agreement among top producers flopped in early March.

OPEC+ failed to reach an agreement on further production cuts to shore up sagging prices as the coronavirus hit the global economy hard.

In an effort to grab market share, Saudi Arabia immediately announced a substantial increase in its production to 12.3 million bpd and exports to 10 million bpd at the beginning of April.

The energy ministry said it will secure the increase from two sources, by using natural gas in the domestic market to free up oil for export and also as domestic consumption drops because of the coronavirus.

The price of oil struck its lowest levels in more than 17 years on Monday, with Brent North Sea crude tumbling to $22.58 per barrel at one point.

There are warnings that oil could sink even further as storage tanks around the world approach full capacity.

Just think of what this is doing to Venezuela.

They’ll just have rely on illegal drug sales.

Now the oil field guys know what us farmers have been feeling for years. We've been giving corn away.

Question is how long will this deflationary pressure last with the trillions of paper they are printing......

Best part is your buddies wonder why you're pissed when they swear they're going all week then bail the night before, too late to find a fill in. Stuck splitting $800 trip 2 ways instead of 4.

happens Brian wanted me to go tomorrow but i got work to finish, and tomorrow is the only half decent day this week weather wise.

normally 6-7 of us go out.

I am so damn happy that after 30+ years in O&G I am pretty well immune to it in retirement.

Could you get the money up front?

Geno

Filled my 2000 gallon off road tank. At theses prices its money in the bank.

I'm going to do some serious boating in this summer. Hope it drops to $2.50 Even at $3.00 (now) it's a bargain.

The Global Oil Market Is Broken, Drowning in Crude Nobody Needs

I need it, and I'm burning and storing the schitt out of it.

Bingo we have a winner. COVID-19 is just an added complication.

https://uk.reuters.com/article/us-whiting-petrol-bankruptcy-idUKKBN21J5KS?taid=5e84b97d01cef40001c15862&utm_campaign=trueAnthem:+Trending+Content&utm_medium=trueAnthem&utm_source=twitter&utm_source=reddit.com

U.S. shale company Whiting becomes first major bankruptcy of oil-price crash

(Reuters) - Whiting Petroleum Corp filed for Chapter 11 bankruptcy, the U.S. shale producer said on Wednesday, the first publicly traded casualty of crashing crude oil prices that are expected to bite into record U.S. output.

Whiting was once the largest oil producer in North Dakota, now the second-biggest oil-producing state in the country. It has agreed with creditors to cut its debt by about $2.2 billion through an exchange of some of its notes for 97% of new equity. Existing shareholders will own 3% of the reorganized company.

Notably, Whiting said in a regulatory filing that on March 26, in response to the circumstances affecting the oil industry, it revised its compensation program to pay out more than $13 million bonuses to several executives, including $6.4 million to CEO Brad Holly.

Numerous shale oil and gas producers, faced with burdensome debt loads, have cut spending aggressively as oil prices have plunged by about two-thirds this year with the coronavirus pandemic slamming fuel demand and Russia and Saudi Arabia flooding markets with extra crude.

A U.S. drilling boom over the last three years lifted national oil production to a record of roughly 13 million barrels per day, but investors have grown frustrated with poor returns. Callon Petroleum and other companies have hired advisors to restructure debt.

Shares of Whiting fell 32 cents, or 47%, to 36 cents each on Tuesday.

The company’s market valuation has shrunk to $32 million from as much as $15 billion at its peak in 2011, when investors were discovering the burgeoning shale sector. As of Dec. 31, Whiting had $2.8 billion in debt and more than $585 million in cash on its balance sheet.

Whiting is among the most shorted oil and gas stocks, with more than 60% of its outstanding shares borrowed for short selling, according to FIS Astec Analytics data.

Analysts believe the energy sector is primed for more defaults in coming months. Whiting’s bankruptcy brings the trailing 12-month high-yield energy default rate to more than 11%, and the year-end figure could ultimately surpass the 19.7% level set in January 2017, according to Fitch Ratings.

Energy producers Chesapeake Energy Corp and Chaparral Energy Inc as well as natural gas producer Gulfport Energy Corp are working with debt restructuring advisers or investment banks to shore up cash reserves.

SunTrust Robinson Humphrey analyst Neal Dingmann said filing for bankruptcy “was more of a temporary solution than a long-term sustainable plan.”

“We believe this financial demise was due to a combination of difficult macro conditions combined with sub-par operations for several quarters,” Dingmann said.

The company was also hampered by debt after purchasing rival Kodiak Oil & gas in mid-2014, just before shale’s 2015-2016 crash, for $6 billion, which included $2.2 billion in debt.

Whiting was expected to produce about 42 million barrels of oil equivalent in 2020. It said it would continue to operate without material disruption to vendors, partners or employees.