An oil production facility of Sinopec, China's largest oil refiner, based in Taizhou, East China's Jiangsu Province, fully resumed drilling and well repair work on Sunday. The facility's daily output is more than 1,200 tons. Photo: cnsphotos

The oil market, rocked by crisis this week as prices plunged below zero on rampant oversupply and demand-destroying coronavirus, faces the critical problem of where to store surplus crude.

"To put it simply, there is too much oil with too little space to store it," said TS Lombard economist Konstantinos Venetis.

In recent weeks and months, prices crashed as the COVID-19 pandemic brings the global economy to its knees - and sends crude demand falling off a cliff, with the world on lockdown and oil-dependent sectors paralyzed.

That has left the world awash with plentiful supplies of so-called black gold.

"Storage demand accelerated from the second week of March onwards," said Ernie Barsamian, head of specialist brokerage The Tank Tiger.

In a fresh twist this week, New York's light sweet crude turned negative on Monday for the first time in history. 

West Texas Intermediate (WTI) for May delivery collapsed to an unprecedented low of minus $40.32 per barrel as traders scrambled to sell before the contract expired Tuesday.

The negative price means that traders were actually forced to pay to have the crude taken off their hands - yet few could locate buyers with somewhere to store it.

This week's meltdown also saw European benchmark Brent North Sea oil touch a two-decade low of $15.98 on Wednesday, before rocketing higher on threats by US President Donald Trump to shoot at Iranian boats in a key waterway for crude shipments.

Oil movers and shakers are now desperate for storage in part of the industry which operates with very limited spare capacity. Oil companies are racing to locate adequate storage facilities - either on land in refineries and other facilities, or at sea on tankers.

The enormous storage terminal in Cushing, Oklahoma - where WTI is delivered - is nearly full given ample US production levels.

Some cargo ships are meanwhile being requisitioned as tankers.

AFP