Yesterday, WTI crude fell nearly $4/bbl but settled roughly $1/bbl higher than session lows in an apparent short covering rally amid no new news. This morning we are seeing a continuation of losses as the world runs out of storage. Reuters reported that South Korea had run out of commercial storage space for oil. All of the around 38 mmbbls of onshore commercial capacity owned by state-run Korea National Oil Corp. and Oilhub Korea Yeosu Co. has been rented out. Some sources have estimated that global oil storage capacity currently stands at 85% full. The only remaining alternative for some countries is floating storage or ship borne storage.
In the US, oil producers are also running out of space to store oil. The Energy Department has finalized contracts that had been announced earlier in the month for companies to rent around 23 mmbbls of oil storage capacity in the Strategic Petroleum Reserve (SPR). This month, 1.1 mmbbls have been delivered to the SPR for storage by US companies.
Industry data in the US reported oil rig count fell for the sixth straight week last week, down 60 rigs to 378. This is the lowest number of active rigs seeking oil in the United States since July 2016. Since March 13, producers have taken down 305 oil rigs.
Last week, the Russian Energy Minister Alexander Novak instructed Russian oil companies to cut production by 20% to 8.5 million bpd to meet the May 1st OPEC+ deadline. Russia plans to cut its crude exports from Baltic and Black Sea ports by as much as 50% beginning in May.
In early trading today, crude prices are down. Crude is currently trading at $11.88, a loss of 90 cents.
Fuel prices are mixed this morning. As we had said in yesterday’s FUELS News, at this time of year, diesel trading below gasoline is normal. We see this reflected in today’s prices. Diesel is trading at $0.6097, a loss of 0.1 cents. Gasoline is trading at $0.6800, a gain of 3.2 cents.