The historic OPEC+ production cut deal may have prevented a total disaster in the oil market, but it will be unable to stave off the impending global oil inventory build that is threatening to fill all the available storage in the world over the next few weeks, the International Energy Agency (IEA) on Wednesday.
"Never before has the oil industry come this close to testing its logistics capacity to the limit," the agency said in its closely-watched Oil Market Report for April.
According to the IEA, the demand loss due to the coronavirus pandemic could result in a stock build of 12 million barrels per day (bpd) in the first half 2020, despite the to cut collective production by 9.7 million bpd in May and June.
The glut "still threatens to overwhelm the logistics of the oil industry - ships, pipelines and storage tanks - in the coming weeks," the Paris-based agency said in the report.
Overall, the global storage capacity may be overwhelmed by the middle of this year. Still, there are already signs of logistics strains in many places around the world and at other parts of the logistics chain, such as competition for buying space on pipelines systems. At many sites, it's not possible to store different crude grades, while some crudes and oil products need special tanks for storage, the IEA said.
Offshore, traders are scrambling to book floating storage, and charter rates for supertankers are skyrocketing, the agency noted.
One factor that could alleviate the glut and "create extra headroom for the impending stock build-up" is the fact that China, India, Korea, and the United States "have either to temporarily park unwanted barrels or are considering increasing their strategic stocks to take advantage of lower prices," the IEA said.