With demand dried up in the wake of the Russian-Saudi price war and now historic plunging prices extending through Tuesday, and little to do to give prices a short-term boost given lack of buyers in a flooded market, the kingdom has been forced to store much of its oil at sea.
"At least one in 10 supertankers around the world is serving as a floating oil storage facility, Saudi oil officials say," the WSJ reports.
As of the start of Wednesday, broker Clarksons Platou Securities has noted global floating storage is now accelerating at an “unprecedented pace” currently amounting to almost 250 million barrels, up from common estimates of 160 million bbl only last week.
Tankers are literally stranded without buyers, and it should be remembered too that last month charter rates for the giant vessels reached highs of $350,000 a day.
Supertankers are capable of each holding up to 2 million barrels of oil, now fast converting to indefinite massive storage units due to global oversupply.
This estimated some 250 million barrels now floating aimlessly outside shipping ports marks a record that smashes the previous highest level of tanker-stored oil in 2009.
According to the WSJ's estimates citing the Saudis, "About 80 supertankers out of 750 world-wide are now used to store oil rather than transport it, according to Saudi officials."
And shockingly only by last Friday, it was recorded: "The amount of oil in storage at sea rose by 21 million barrels to 147.6 million in the week to April 19, according to commodities-data provider Kpler, making up the bulk of the stocks increase globally."
There's talk among the Saudis of drastically cutting oil output immediately even before a last-ditch agreement brokered among OPEC, the US and Russia and other OPEC+ petroleum-exporting countries takes effect next month to cut their oil production by 9.7 million barrels per day through June.
Oil tankers carrying enough crude to satisfy 20% of the world’s consumption are gathered off California’s coast with nowhere to go https://t.co/941dohkrOf— Bloomberg Asia (@BloombergAsia) April 21, 2020
“The kingdom is now facing a situation where they may have to shut parts in their production, likely from Ghawar and other fields because they don’t have buyers,” a senior Aramco executive told WSJ.
“The fact is buyers don’t have storage so regardless of whatever level of output you want, there won’t be storage for it,” he said.
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Meanwhile, in more good news...
20 tankers—filled w/ 40mm barrels of Saudi oil—are headed to the US. This is SEVEN TIMES the typical monthly flow. At the same time, oil futures are plummeting & millions of US jobs in jeopardy. My message to the Saudis: TURN THE TANKERS THE HELL AROUND. https://t.co/gYoQzvHAEQ— Ted Cruz (@tedcruz) April 21, 2020