London-based analysis firm IHS Markit has closely examined the world’s supply and demand for oil and said in a statement that “there will be a glut of 1.8 billion barrels in the first half of this year, which exceeds the current crude oil storage capacity of 1.6 billion”.

Furthermore, it said China has the greatest tank storage availability to deal with this over-supply of oil: “China is in the most favourable position for storage, with a more than 52-day window until its storage would reach capacity, while the US and Europe would both fill their storage facilities in around 30 days.”

It acknowledged that the storage capacity varies greatly across different countries and said Nigeria is currently in the worst position in this respect. IHS estimated the country’s daily production of 1.9 million barrels per day would fill its available local storage in just 1.5–2 days if its production of oil isn’t sold on.

For some production facilities though, there are added risks to shutting down production for purely economic reasons, such as the potential to cause reservoir damage, it said. 

Aaron Brady, Vice President of IHS Markit, said: “Those with better access to storage options may fare better than others. Creative storage solutions are likely to emerge, but they are unlikely to make up for the sheer pace and scale of the supply surplus.”

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30th March 2020