‘Oil rises to $30, could crash to $10 as world runs out of storage’

The growing supply glut in oil markets could end up filling all storage tanks worldwide, potentially causing prices to drop even further, even as Brent crude rose to $30.43 per barrel as 8:20pm GMT.

Global oil storage could overflow in the coming weeks as the coronavirus pandemic has dealt a severe blow to demand while Saudi Arabia has promised to supply 12.3 million bpd—not just in April but also over the next few months.

Reuters reports, citing analysts, that such a development would overwhelm the already troubled oil industry, forcing production shutdowns. Storage facilities—both on land and offshore—are already filling up, the news agency noted, and Saudi Arabia has not yet started to increase its deliveries of crude.

If such a scenario unfolds, some analysts believe oil prices could slide as low as $10 per barrel.Already, the Group Managing Director of the NNPC, Mallam Mele Kyari, painted a gloomy picture of the Nigerian economy in the months ahead, appealing to industry captains and Nigerians, to be prepared for very lean times.

Crude oil and LNG are Nigeria’s main dollar earners, but the sector is facing turbulence in the international market, with Russia and Saudi Arabia declaring a price war, amidst market slump because of the coronavirus pandemic.

Most shocking, he said the country has been unable to sell 50 cargoes of crude and 12 cargoes of Liquified natural gas.

“We believe we have not seen the worst of the price rout yet, as the market will soon come to realize that it may be facing one of the largest supply surpluses in modern oil market history in April,” Reuters quoted Rystad Energy’s head of oil markets, Bjornar Tonhaugen.

Saudi Arabia said yesterday, it would maintain oil supply at 12.3 million bpd over the next few months, with exports to rise to a record 10 million bpd from next month, Reuters reported on Wednesday.

Meanwhile, the glut is causing traders to offer their cargos at steep discounts in a desperate effort to find buyers, Reuters also reported. This raises some questions about Saudi Arabia’s ability to sell the excess crude it plans to be producing over the coming months.

“There are no buyers,” an oil trader from the U.S. told Reuters. “Refiners in trouble, exporters in trouble, producers in trouble. This is a disaster with no end in sight.”

“Cargoes are being severely discounted to move as there are little prospects to export and also very few options to store on ship and/or tanks,” another industry source told Reuters.