The Organization of the Petroleum Exporting Countries (OPEC) and Russia had cooperated closely since 2016 to curb production, support prices, and protect their precious revenues.
The perfect storm sent oil prices collapsing to their lowest levels in almost two decades, with London Brent North Sea hitting $24.52 per barrel and New York's WTI crude striking a nadir of just $19.46.
However, despite evaporating demand, production has continued apace – and the resulting oil is often destined for overstretched storage facilities around the world, according to industry experts.
"We knew that surging output from OPEC members would place upwards pressure on crude oil stockpiles," Petromatrix analyst Olivier Jakob told Agence France-Presse.
"Yet this phenomenon clearly accelerated...with the collapse of oil demand."
As a consequence, the market remains awash with crude in storage on land and in container ships.
And the estimated level of total oil stockpiles has now overtaken the previous peak set in early 2017, according to data from energy sector intelligence firm Kpler, which warns stocks continue to swell.
Michael Tran, energy strategist at RBC Capital Markets, predicts the global surplus could now reach 10.6 million barrels of oil per day (bpd) in the 2nd quarter of the year.
Challenge to capacity
"Global storage is currently 66% utilized and nearly 1.7 billion barrels of unused capacity remains," Tran said.
"By our estimation, inventories may challenge global storage capacity limits late this year or early next."
Kerosene or jet fuel – which is refined from crude – is often the first oil product to suffer because aviation demand tends to falter first in a weak global economy.
"Among the various fuel sectors, we expect jet fuel to be hit the hardest," added Rystad Energy analyst Bjornar Tonhaugen.
"We now see jet fuel demand falling by almost 20% year-on-year, or by at least 1.4 million bpd. Last year's demand for jet fuel was seen at about 7.2 million bpd.
"Storage tanks, especially for jet fuel, will reach [their maximum level] possibly...during April."
SEB analyst Bjarne Schieldrop painted a similarly gloomy picture of the outlook for oil storage, as crude prices languish close to recent lows with no sustained recovery yet in sight.
"We are now looking at surplus in the 2nd quarter of 2020 at a scale that we have never seen before," he said, adding that with people now sitting at home in confinement that demand could fall even more.
"It means that storage capacities will be breached. The oil price will then have to crash to a level where production more or less immediately is shut down. This now seems to be where we are heading," Schieldrop warned. – Rappler.com