BP's Stunning Warning: "Every Oil Storage Tank Will Be Full In A Few Months"

Tyler Durden's picture

It was just last week when we said that Cushing may be about to overflow in the face of an acute crude oil supply glut.

“Even the highly adaptive US storage system appears to be reaching its limits,” we wrote, before plotting Cushing capacity versus inventory levels. We also took a look at the EIA’s latest take on the subject and showed you the following chart which depicts how much higher inventory levels are today versus their five-year averages.

graph of difference in inventory levels as of January 22, 2016 to previous 5-year average, as explained in the article text

Finally, we went on to present two alarm bells that offer the best evidence yet that inventories are reaching nosebleed levels: 1) some counterparties are experiencing delays in delivering crude due to unspecified "terminalling and pump" issues (basically, it’s hard to move barrels around at this point because there’s so much oil sitting in storage); 2) the cash roll is negative.

On Wednesday, BP CEO Robert Dudley - who earlier this month reported the worst annual loss in company history - is out warning that storage tanks will be completely full by the end of H1. "We are very bearish for the first half of the year," Dudley said at the IP Week conference in London Wednesday. "In the second half, every tank and swimming pool in the world is going to fill and fundamentals are going to kick in," he added. "The market will start balancing in the second half of this year.”

Maybe. Or maybe excess supply will simply be dumped on the market once all the "swimming pools" are full.

If that happens, don't be surprised to see crude crash into the teens as attempts to clear and dump excess inventory spread like wildfire across the market.

Earlier this week, the IEA called any respite for crude prices "a false dawn." Here's why (via The Guardian): 

  • a deal between Opec and other oil producing countries to cut production is unlikely
  • with Iran increasing production in preparation for the lifting of sanctions, Opec’s production could rise as strongly this year as in 2015
  • there is little prospect falling prices encouraging a pick-up in the rate of demand for oil
  • the US dollar is likely to remain strong, limiting the scope for falls in the cost of imported oil
  • the predicted large fall in US shale production is taking a long time to materialise

So buckle up, because the collapse in the world's most financialized of commodities has further to go, and once the entire US shale space goes bankrupt, it will emerge debtless only to start drilling and pumping anew prompting the Saudis to continue to ratchet up the pressure in an endless deflationary merry-go-round. We close with a quote from the IEA:

"We suggest that the surplus of supply over demand in the early part of 2016 is even greater than we said in last month’s oil market report. If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term. In these conditions the short-term risk to the downside has increased.” 

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silverer's picture

I'm making a point to be a good citizen and driving as little as I can, getting three things done with every trip out the driveway. After all, Al Gore said it was a good idea for the environment.

NoDebt's picture

BP?  Maybe they could just "store" it in the Gulf of Mexico.  That's a pretty big storage tank.

cheka's picture

peak oil

what a scam...has to rank near the top of successful hoodwinks

thesonandheir's picture

Renting out my bathtub for $5000 a day.

Uchtdorf's picture

Question: Does anyone know who was the first to predict this oil glut and a $20 handle for a long, long time? Because a couple years ago when oil was north of $100 not many envisioned cheap oil.

Now we're expected to believe that oil will "always" be cheap. Right. what if the Persians and the House of Saud decide to get serious about fighting each other? What if hyper-inflation takes off? Nobody coulda knode.

The_Virginian's picture

Raoul Pal was talking about it before the dollar and oil began their big moves in '14. 

zeronetwork's picture

To me it looks like a preparation for a global war within few months.

Citxmech's picture

Look what $140/bbl oil did to consumption.  The bumpy plateau was baked into the cake.

Poundsand's picture

Where are all those peak oil guys right about now?  Weren't we supposed to run out in like '95?  '05? '12?

MalteseFalcon's picture



When they shut down oildrum.com, I knew it was over.

Citxmech's picture

By your logic, the US economy must be doing AWESOME! because the USD is so strong relative to other currencies.

The Peak Oil hypothesis actually predicts that we'll never "run out" of oil - it predicts that as the required extraction methods become more expensive to maintain production, eventually the economy will collapse and production will plummet with substantial oil still in the ground.  Of course the price is going to become unstable as the top slows down.  Whether the price is at the moon or in the toilet isn't the issue - it's that it's at an extreme and not stable. 

MalteseFalcon's picture

A bunch of trifling nonsense.

You ignoramuses had the world running out in the mid 1970s.

It's 2105, oil storage is full and we're swimming in it. 

And the USA still pumps out oil.

Other sources of energy, natural gas for one, have emerged as well.

The "energy crisis" was a hoax and just as big a crime against humanity as "climate change".

spfoo's picture

No - the previous poster is right. Peak oil meant oil reserves peaking. And that has happened already long ago. However the theory also expected price of oil to become very high - as it did earlier. But the theory did not take into account that the world would be stupid enough to start maximizing production due to the high price. That was naive.

ATM's picture

So it appears that "Peak Oil" was nothing more than a restatement of the theory of supply and demand? That's not how I remember it.


Citxmech's picture

No.  Hubbert's hypothesis was that production followed leading indicator of field discoveries.  If new finds peaked, then a production peak would follow.  This hypothesis was tested and performed well on the production peak in the US that followed a peak in new discoveries.  

Hubbert was no idiot.  He knew that as price climbed, the lengths that folks would go to continue production rates would increase as well.  The theory never said that production would follow a perfect Bell curve either.  

What Hubbert was an engineer, not an economist.  He didn't offer an opinion on how the global market would react to a peak in conventional oil production in terms of daily pricing.  

Regardless, we're seeing that effect in the form of whipsawing prices and crashing demand.  Market dynamics has nothing to do with the falling EROEI of oil production - which is the big picture of Peak Oil theory. 

KnightTakesKing's picture

There is a theory that is gaining popularity. The theory is oil is abiotic. Meaning, the earth 'naturally' makes oil. The theory goes that oil is not made from dead dinosaurs but is manufactured by natural earth processes that use carbon deep within the earth.

If the theory is correct, we would likely never run out of 'fossil fuels.'

jerry_theking_lawler's picture

Because its not 'fossil' fuel afterall...its Gaia fuels?

StychoKiller's picture

Hmm, what part of:  Amt of Oil < Volume of the Earth do you NOT understand?

MalteseFalcon's picture

The sun is not going to last forever, either.

Still I'm going to hang on to my SPF 15 anyway.

OK, buddy?

Citxmech's picture

So do you think that the oil brought to market by deep water drilling and fracking costs the same to produce as it did in the old days when Ghwar was freshly tapped by sticking a straw into the ground?

Why are we going to all this trouble again?

When demand plumets due to the strain high prices put on consumption - so do prices.  Now, a huge segment of oil production is unsustainable based on the commodity price.  It's just going to take a while for wells to be shuttered.  Don't forget that a field's amortized cost is related to the infrastructure investment - not just the cost to run the pumps.  Once a well is built, the cost to run it is less important as long as it results in cashflow that would help pay back the note on the development.

MalteseFalcon's picture

The "cost" of oil includes much, much more than the means of removing it from the ground.

There are all kinds of middlemen that add their piece of the action to the ultimate price.

Stripped to its essentials, oil is quite cheap and plentiful as is apparent now.

new game's picture

dynamic and relative, yup, good post...

cheka's picture

oildrum.com ha ha

those pumpers cut and ran

moved on to peak water b.s.

Deathrips's picture

You all may be missing the point with peak oil folks. THe govt has a plan to sell national assets at the bottom..to themselves. You may recall Examples like browns bottom etc?

This is according to plan as soon as the companies are nationalized or sold..oil will run high at a quick pace.


THink grasshoppers.



MalteseFalcon's picture

Government land shouldn't be sold.

And calling this a bottom implies a rebound to $100 a barrel oil.

Not happening.

The oil game is over.

bid the soldiers shoot's picture

You knew what was over?

Peak oil?  or the Global Economy?

Cloud9.5's picture

Cheka, take a look at this trend.  https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=a103600001&f=m

Look at November 2005 and then look at November 2015. Ten years later we are using less than half the gasoline we were using ten years ago.  I know we have bought a bunch of electrics and hybrids, but in truth they are fraction of the world transportation fleet.  I have never seen a battery powered merchant ship, semi-tractor trailer or commercial air liner.  This chart looks like serious demand destruction to me.

Here is a theory for you:  The exponential growth we have seen beginning in the middle of the 1700’s was the direct result of the exponential growth we saw in the extraction of energy in the form of oil, gas and coal. The industrial revolution kicked into high gear both the exponential growth of wealth as well as the exponential growth in population.  All of that growth was fueled by oil, gas and coal.

In the 1930’s it took one barrel of oil to get 100 barrels to market.  In the 1970’s it took one barrel to get 30 barrels to market.  Shale oil requires 1 barrel to get 5 barrels to market.  And tar sands require 1 barrel to get 3. The huge growth we have seen in production is the direct result of hot money pouring in to shale and tar sand oil plays.  The trend we are seeing in EROEI is unforgiving.  We are not far from the point that the ratio will be 1 to 1.  When it gets to 1 to 1, drilling stops.

Look at the ten year gasoline price chart.  http://www.gasbuddy.com/Charts

When gas prices got this cheap in 08, the economy had a heart attack.  In 08, the Baltic Dry Index had a similar trauma.   http://investmenttools.com/futures/bdi_baltic_dry_index.htm

Today, the Baltic Dry Index is lower than it was in 08.

It may be against your interest to acknowledge these trends.  If that is your case, then continue to talk your book.  For anybody else reading this, realize we are at Seneca’s Cliff.  It may take three months to build a house, but it burns down in less than half an hour.  Prepare accordingly.



jpintx's picture

NO, we are not using less than half as much gasoline as we did in 2005!  The chart you are referring to is of RETAIL SALES BY REFINERS, refiners have been exiting the retail business, selling more product wholesale to those taking up the retail trade.  Gasoline demand has decline somewhat but by no means to that extent, here is the data for Total Gasoline supplied http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MGFUPUS1&f=M    You might note that Jan 2005 equalled 273 million barrels (11.5billion gallons) as did November 2015 equalled 273 million barrels.  Overall vehicle fleet fuel efficiency is prime cause.  Electrics don't amount to a fart in a hurricane.

Cloud9.5's picture

Thanks for the chart.  I had not seen that one before.

Cloud9.5's picture

Is this the domestic market or does it include exported finished product?

jpintx's picture

This is total motor gasoline supplied which is the best measure of US demand.  However, remember that we are net importers of gasoline.  Last 6 weeks imports, mostly of unfinished gasoline components averaged roughly 575 thousand barrels per day (MBD), exports were of finished gasoline and averaged 470 MBD for the same period.  There may be an odd week here and there over the last 5 years where we are a net exporter of gasoline, but very few.


As to total US gasoline demand, see this  https://www.eia.gov/tools/faqs/faq.cfm?id=23&t=10




cheka's picture

cloud.  it is easier to fool a man than to...

why is there a cartel?  what are cartels for?

why are huge swaths of the earth OFF LIMITS to drilling?

why did the same liars push FOSSIL fuel meme.  how many frikking dinos are pumped out of ground DAILY?

did the uber deep bp well make you realize that oil has nothing to do with fossils?

the local corner store is more likely to be out of bread than oil

how did oil rocket to 150 to 27?

the REAL game is oil production SUPPRESSION and price manipulation, mainly through nyc.opec

true scarcity doesn't need a cartel


and guess what....if oil becomes too dear....natgas and coal are sitting right there, ready to be converted.  need to add those GIGANTIC reserves to total oil calcs.

peakers need to find something else to worry about.  but please don't make it water....it's a closed loop system

MalteseFalcon's picture

"Seneca’s Cliff."


Fuck you.

Cloud9.5's picture

Thanks for the offer but you would not find it pleasant.  I have looked at the plumbing and as a result when it comes to personal encounters I am rather homophobic.

bid the soldiers shoot's picture


There's nothing like a 7 year long recession and a pretend recovery of equal length to, if you'll pardon the word, retard the onset of crude oil consumption in surpassing its production, aka 'peak oil.'

I believe the subprime mortgage bubble was made in Langley and Washington and today's exacerbating glut of oil was made in Riyadh, initially to punish Russia and now to further sink the global economy.


Why does the world's economy have to be curtailed?

So the US can maintain its global hegemony. The importance of the possession of crude oil at the endgame is obvious. 


cheka's picture

how'd that shemitah work out for you guys?  is it still in play too?

VinceFostersGhost's picture



We're at peak storage here.....this can't be good for the climate.

PTR's picture

Aren't we supposed to have a hollow Earth?  Store it there.

JRobby's picture

they stopped short, all tanks and the full tankers floating with no where to drop off.

aardvarkk's picture

They tried that with the Deepwater Horizon thing, but it didn't go over too well.

Mr. Cynic's picture

Hmmm....maybe we could pump it underground and store it there....oh, wait.

corporatewhore's picture

And it's not just an ordinary car with low maintenance or replacement costs.  It's the high end and it's probably used.  People have no idea and haven't taken the time to figure out how much that windshield with lane departure control, rain sensors, and other bells and whistles is going to cost if it has to be replaced.

JRobby's picture

That's the plan

All that shit breaks

"Here it is folks! The car that drives itself! Until it doesn't"

swmnguy's picture

And the key to that scam is, once the car doesn't drive itself, nobody else can drive it either.

Buster Cherry's picture

Just wait till a cow walks out in front of you.

silverer's picture

And now they plan to "help" those folks with negative interest rates? I can't think of anything else to write after this and in addition to what you just posted. Just shaking my head now. The US is so screwed.