The news that OPEC producers and Russia will raise crude oil production will mean a higher demand for freight services and storage facilities which stands to benefit storage companies worldwide. Demand for storage onshore US, for example, has spiked in recent days as storage brokers and companies that auction storage have seen an influx in business and request to provide increased options.

MIDF Amanah Investment Bank Bhd (MIDF Research) research analyst Noor Athila Mohd Razali said: “Basically, a tank farm is crude oil storage facility and the low oil price environment would not impact storage demand as crude must be stored somewhere for refineries and petrochemical plants to use later.”

AmInvestment Bank analyst Alex Goh added though that the fall in crude oil price is likely to be more severe than that seen in the 2014-2017 period when Saudi Arabia waged war against US shale oil producers by pushing Brent oil price to US$26 (RM110.12)/barrel.

Another potential positive outcome of the current market storm change is that it might accelerate the global transition to cleaner energy sources. 

Valentina Kretzschmar, Director of Corporate Research at Wood Mackenzie, said: “The argument that has often been put forward is that they can’t invest in renewables because renewable projects offer much lower returns than oil and gas projects. That argument no longer holds at $35 per barrel.” 

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19th March 2020