News Code : 44325

Petrotahlil - The global oil market is on track to test storage capacity limits in as little as three weeks, requiring the shut-in of nearly 20% of global production, according to Goldman Sachs Group Inc.

The world has reached an inflection phase in the pandemic where rebalancing is starting to occur, but it will likely take 4-8 weeks for commodity markets to carve out a bottom in demand, Goldman analysts including Jeff Currie said in an April 24 report.

With crude oil building up in storage tanks at record levels, that means global storage capacity will be tested in the next three to four weeks. Once there’s nowhere left to put oil, drillers will have to shut enough supply to match the demand loss, which Goldman estimates to be about 18 million barrels a day in mid-May.

That “will likely create substantial volatility with more spikes to the downside until supply finally equals demand,” Currie said.

Supply shut-ins, including about 10 million barrels a day of cuts from OPEC and its allies, can’t be undone quickly, meaning the global oil market could be in a deficit by June. Prices will likely only slowly recover, though, until mid-2021, when there’s a potential for a tight market again.

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