Nigeria is the most vulnerable country with the least capacity to spare as crude demand declines and supplies build up, according to a new assessment of oil markets by IHS Markit
IHS Markit Crude Oil Markets service measures storage vulnerability by calculating how many days of domestic crude oil production could be placed in available storage. Here, Nigeria is the most vulnerable among the areas measured. Estimated Q1 2020 daily production of 1.9 million bpd would fill up available local storage in 1.5 to two days if no production is moved onward.
The firm said available storage capacity relative to production varies widely. The number of days it would take domestic crude oil production to fill available national or regional storage ranges from Nigeria at the low end to China, which may have as much as 52 days of daily production storage available.
According to HIS Markit, current global output levels cannot be sustained throughout the second quarter because oil storage capacity will fill up.
It estimates that the gap between world oil (liquids) supply and demand will be 7.4 million bpd for Q1 2020 and 12.4 million bpd in Q2 2020.
This differential adds up to a first half 2020 surplus of 1.8 billion bbl. That exceeds the upper end of IHS Markit’s estimate of available (empty) crude oil storage capacity, which is 1.6 billion.
“The current supply/demand gap adds up to a first half 2020 surplus of 1.8 billion bbl,” said Jim Burkhard, vice-president and head of oil markets, IHS Markit. “That exceeds the upper end of our estimate of available crude oil storage capacity, which is 1.6 billion. Production is going to have to be reduced or even shut in. It is now a matter of where and by how much.”
“Those with better access to storage options may fare better than others,” commented Aaron Brady, vice-president, IHS Markit. “Creative storage solutions are likely to emerge, but they are unlikely to make up for the sheer pace and scale of the supply surplus.”