The pandemic first destroyed demand as lockdowns shut factories and kept drivers at home.
Consequently, storage started filling up and traders resorted to ocean-going tankers to store crude in the hope of better prices ahead.
The looming chapter in the great oil crisis now looks more inevitable: Great swathes of the petroleum industry are about to start shutting down.
It’s the worst-case scenario for producers and refiners.
The number of oil rigs in operation in the US last week fell to a four-year low.
By Friday, more than 40% of them had stopped working, with only 378 left.
The output cuts won’t be limited to the US.
From Chad, a poor and landlocked country in Africa, to Vietnam and Brazil, producers are now either reducing output or making plans to do so.
As traders scour the globe for places to stash oil, three of the world’s biggest buyers — China, India and Japan — are in focus.
Together they purchased almost 40% of the world’s imports in 2018.
China has about 937mn barrels of oil in tanks with floating roofs, according to an April 22 estimate from Orbital.
The country may now struggle to maintain current import levels without exceeding storage capacity, according to Sanford C Bernstein & Co
In India, a lockdown of more than 1bn people has pummelled the appetite for transportation fuels.
Oil in floating-roof storage spiked to as much as 134mn barrels earlier this month, while fuel inventories are already at about 95% of capacity.
Japan has about 355mn barrels of oil in floating-roof tanks, which is seasonally in-line with the previous the three years, though the stockpiles started 2020 at a much lower level than normal.
As least 85% of the country’s storage is on floating roof tanks, according to Orbital.
These are, for sure, bad times for the oil market.
Global oil demand will decline this year for the first time since the 2009 financial crisis as the coronavirus slams the global economy, according to the International Energy Agency.
For only the fourth time in almost 40 years, oil consumption may not grow at all in 2020, according to a growing minority of traders, investors and analysts.
What’s in store for the oil industry?
The virus recession looks set to outstrip even the most pessimistic of early forecasts.
With strict lockdowns in place across major economies, and growing realisation that the path back to normality will be long, Bloomberg Economics is cutting the estimate for 2020 global growth to -4.0%, down from -0.2% in the last forecast round, and 3.3% at the start of the year.
The cost of lost output is more than $6tn.
The Opec+ alliance will join the output cuts on Friday, slashing their production by more than 20%, or 9.7mn barrels a day.
It may not be enough, though.
Every week, 50mn barrels of crude are going into storage, enough to fuel Germany, France, Italy, Spain, and the UK combined.
At that rate, the world will run out of storage by June.