Oil prices have started another losing streak this week due to signals that global oil storage capability is reaching its breaking point. This comes as worries grow over the possibility that the promised oil production cuts will not be enough to meet up with the plunge in demand caused by COVID-19 pandemic.
Brent crude was down by about 8.12%, trading at $19.70 a barrel, at 3.49 pm Nigerian local time, on Monday.
“Rising inventories and weak demand are weighing heavily on sentiment,” ANZ analysts told Reuters.
Meanwhile. there were high price upswings in the oil market last week, as demand for crude fell by about 30% due to the COVID-19 onslaught.
Oil traders expect demand for crude oil to fall short of supply for several weeks as a result of the economic disruption.
Oil producers are not reducing oil production as promised to support crude oil prices and this is not helping, especially as global economic growth is projected to fall by 2% in 2020.
However, OPEC and its allies including Russia, a group known as OPEC+, promised two weeks earlier to reduce oil production by 9.7 million barrels of oil per day in May and June.
Presently, the world’s largest independent oil storage firm is out of storage space for crude oil, because of the fast-increasing oil glut created by COVID-19.
“The available capacity on the oil side is almost completely sold out for our terminals,” Gerard Paulides, the Chief Financial Officer of Rotterdam-based Royal Vopak NV, said in an interview. “For Vopak, the worldwide available capacity that is not in maintenance is almost all gone and from what I hear elsewhere in the world we’re not the only ones.”