One of the largest oil trading companies in the world has announced that global crude storage capacity is running out and that American shale oil producers are selling crude virtually for free, hoping that demand will return.
Marco Dunand, CEO of Mercuria Energy Group, said the developments underscore the difficulties Russia and Saudi Arabia face in trying to reduce US shale oil competition through lower prices.
“In the United States, we buy at levels close to zero, but given their various obligations to pipelines and banks, they continue to sell. They go on non-stop in the hope that demand will return, and they will come back to life,” Donand told Reuters by phone.
About 3 billion people are subject to general closures around the world. Demand for gasoline and aviation fuel collapsed as airlines cut their fleets, putting the financial and oil markets in crisis.
The United States may already be in recession in light of the record high level of 6 million jobless claims.
“Compared to the situation a week ago, the demand crash was between 10 million and 30 million barrels per day, so we are not in a normal market. If you have a margin of error in forecasts of 20 million barrels – nothing becomes meaningful,” the company’s CEO added.
“We think that the refineries consumption is low 15 million barrels per day, which is a conservative estimate. By the way, demand should be low 20 million barrels or more,” Donand added.