Updated: Crude Oil to Overflow by May 18th

Covid-19 has causes a lot of pain to many of us. From impacting national revenue, restrictive movement, salary cut and down to retrenchment. As for Malaysia, this is the 2nd MCO extension.  It will take effect from April 15th to 28th for another 2 weeks.  MCO was introduced in March 18th. Then it was extended for the 1st time from April 1st to 14th. Basically Malaysians have been locked down in their peaceful house for about 3 weeks nowadays.

Covid-19 drag oil demand to the lowest level

As you well aware, due to MCO, we are practising social distancing. Social distancing has made many us stay at home for safety precaution and breaking the chain of the virus. This movement certainly pay a significant toll to supply and demand for crude oil. Previously OPEC+ failed to reach an agreement with Russia to reduce crude oil ouput by 1.5 million barrel per day. Due to this failure oil slides down to the lowest level as storage capacity about to fill up. Months away to their full capacity

Storage capacity to reach maximum level

Based on analysis performed by IHCG, crude oil will reach its full storage capacity by May 18th. Their analysis were  based on 700  million  storage capacity left after April 2nd.  Global crude oil storage capacity is at 1,400  million barrel. Althought OPEC+ & Russia is yet to reach a full agreement as of today, their commitment to reduce by 10 million barrel per day bearing fruitful discussion.

With  this  commitment, we are going to have around 1 month before crude oil started to slide down once again after investors convinced that prior to this meeting they will achieve mutual agreement. They may have achieved an agreement but this cut is not sustainable in IHCG opinion.

However, Russia is not going to cut 15 million barrel per day. As this volume may hurt their fiscal health for government budget. Their resiliency to Saudi Arabia is USD 42 to USD 84 respectively. Saudi Arabia needs the oil price to hovering around that figure in order to sustain their national budget. Otherwise additional tax will be impose.

However, based on latest update from satellite image by Oilx, its satellite bounces radar signals off the massive metal tanks that store oil. It’s coming back with an alarming message: oil storage is running out!

As of 20th April, 3.2 billion barrel of crude oil already stored in storage tanks. The figure is more than double capacity as we’ve known previously. If satellite image is truly legitimate then we should be worrying by now as the world is not transparent enough to report its storage capacity.

According to the result, tank top will happen in late May or early June. In fact there are 50 million barrels of crude are going into storage every week, enough to fuel Germany, France, Italy, Spain, and the U.K. combined

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