With global demand for fuel declining as a result of quarantine measures to counter the emerging Corona virus outbreak and global crude surplus, there is no room left in the Fujairah fuel storage plant in the United Arab Emirates, as a result of the filling of its tanks with oil.
A Bloomberg Network report, reported by World Oil.com, said that the operators of the plant - the largest in the Middle East - said that they rejected the requests of traders and refiners to store raw and refined products, while they had enough room for storage a year ago. Note that the storage capacity of the plant is 14 million barrels.
Without the ability to rent tanks and store oil, merchants face restrictions and problems that hinder their role as a link between suppliers and buyers.
The abundance of global oil makes it difficult for traders to reconcile imbalances in the market, while lower prices for crude oil - which has nearly halved this year - make matters worse.
"If the tanks are rented or blocked, then traders should stop taking crude," said Edward Bell, chief market economics director at Emirates NBD in Dubai, which in turn could "force production shutdowns."
Currently, global demand for oil storage is at its highest level for years, and the tanks are filled with crude oil, gasoline and other products.
"The current capacity is definitely not enough," said Malik Azizi, commercial director of Fujairah oil station.
Even the initial agreement between Saudi Arabia, Russia and other producers to reduce production by at least 10 million barrels per day will not alleviate the storage crisis in Fujairah.
Fujairah has strengthened its position in the global oil storage and supply network over the past 30 years, and has built tanks where merchants can store fuel.
According to the oil industry zone in Fujairah - which oversees the stations - the stock of fuel oil and other heavy distillates in Fujairah swelled by more than 30% last year to 15.4 million barrels. The local authorities do not provide raw oil inventory data.
"Our storage will run out because the drop in demand is so severe," Amrita Sen, chief oil analyst at Energy Aspects, said in an interview with Bloomberg Television.