By Sharon Cho and Alex Longley
Countries are ramping up measures as the global spread of the virus continues to gather pace with the number of confirmed cases in Europe now exceeding China. Italy’s death count has surged to almost 3,000, while the U.K. imposed tighter controls on movement of people including closing all schools.
“We are heading into the most oversupplied market in the history of the oil market,” said DNB Bank ASA senior analyst Helge Andre Martinsen. “We might hit full utilization of global oil inventories in the months to come.”
As the world’s biggest oil producers boost supply, U.S. Republican Senator Kevin Cramer called on President Donald Trump to ban crude imports from Russia, Saudi Arabia and other OPEC members in response to recent action taken by them to “distort energy markets” when demand is already weak.
The Saudis ordered state-run Aramco to keep output at a record high of 12.3 million barrels a day over the coming months. But in a surprise move Thursday, both Saudi Arabia and Iraq cut the rebates on freight costs they give to customers, effectively lifting prices.
The higher supply is increasingly taking its toll on the oil market’s structure. Brent’s six-month timespread is currently at its most bearish since 2009, indicating a big glut. As a result, traders are eying lucrative opportunities from storing oil on tankers and hoping to sell it at a profit later.
With crude’s price weakness getting more entrenched, traders are increasingly trying to assess the impact on U.S. production this year. On Thursday, a barrel of Permian oil was cheaper than a meal at a steakhouse in the region’s Midland heartland, a sign that producers are struggling to cover their operating costs.