"They say no news is good news. Not for oil, not now.
The storage limitation was well-known even before two-three weeks when prices were still volatile. But then, the market had something to wait for, the OPEC+ meeting, the G20. Now these are behind us and without any further agreed production curtailments traders are struggling to bet on a positive note.
But while there are no significant news, developments are running quickly on another front. The storage facilities. They are filling by the day and they won’t stop to do so, as the gap between supply and demand is still humongous. And it will not get much shorter with the coming OPEC+ cuts. Let alone that also these cuts are not expected to be realized to their full agreed 9.7 million bpd.
Now, can we head to negative pricing soon, like last week? Absolutely, negative prices was a normal development and consistent with what we have been warning all along. When nobody wants the produced oil, when there is nowhere to store it, then it is like a hot ‘oily’ potato, that nobody wants to keep in his hands.
The only way to turn around things is either a major boost in demand, which seems unlikely on the short-term, or further production cuts. If the world decides to slash a generous amount of extra million bpd on top of the OPEC+ cuts, that can help. That’ voluntary of course. As things are now, many producers are days away from seeing their production forcefully amputated, with shut-ins being their only option so that oil won’t spill above tank tops.
Therefore, low oil prices should not surprise you today, the question is not if they will fall in today’s market conditions, but how quickly. News are needed for things to change. For prices these days no news is bad news."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/28042020/rystad-energy-comments-on-second-day-of-price-decline/