The oil price crash could be the trigger for a new phase of deep industry restructuring following a lack of production cuts by OPEC+ and the detrimental impact of the coronavirus.
The price war amongst the world’s biggest producers crashed oil markets by around a third and crude futures suffered the second-largest decline on record in the opening of trading in Asia.
However, oil traders are now looking to hold more barrels in storage to cope as oil markets face a supply glut and storage owners are upbeat as more barrels are put in storage.
As a result, the oil market is now in a steep contango, which creates an incentive for storage.
Tom Ellacott, senior vice president, corporate upstream at Wood Mackenzie says: ‘The price collapse could be the trigger for a new phase of deep industry restructuring – one that rivals the changes seen in the late-1990s.
‘This is not the first time we’ve seen a price war – the last was a recently as 2015/16. But this time, oil demand is also weak as the coronavirus outbreak depresses global economic growth.
‘The macro-economic backdrop is completely unchartered waters for oil and gas companies.’