The oversupply has pushed oil refiners to look for ways to store the oil at sea using tankers. This sudden demand pushed tanker rates higher. At the same time, refiners are reducing their production due to the lack of storage space for their output, and many refineries are looking at shutting down operations. If that happens, it will further hurt crude oil demand.
Experts think that about half of the oil-producing companies will be facing a cash crunch, and they may have to look for ways to increase their liquidity. The US shale complex, for instance, has been an expensive proposition from the start, and there will likely be supply losses even in May. Production cuts are imminent. Traders believe that the oil price may turn negative again in June if the current situation prevails.
When the lockdown ends, much will depend on how quickly economies can revive and how producers, including those in the US shale patch, continue to respond. That would allow inventories to stop rising and begin to plateau. However, if the lockdowns extend beyond June, things will get more complicated. As the global economy back to life, oil refineries will not be roaring back towards full capacity immediately.