Saudi Arabia’s decision to flood the market with crude oil at a time when demand is in doldrums amid coronavirus pandemic is about to create a massive supply-demand imbalance, says BIMCO’s Chief Shipping Analyst, Peter Sand.

Liquid fuels production and consumption will be imbalanced during much of 2020 with total production estimated at 102.2 million barrels per day (m bpd) in Q2 compared to estimated consumption of 100.3m bpd, data from US EIA shows. This implies an inventory buildup of 1.9m bpd.

Most of it set to take place in April for as long Saudi Arabia keeps production elevated.

With land-based oil storage potentially approaching full capacity fast, there is a limit on how much additional oil can be imported. Risk-loving oil traders may look to time charter VLCCs for floating storage.

BIMCO believes such actions will extend the time of elevated freight rates that soared recently a result of the recent geopolitical developments marked by OPEC+ negotiations falling apart and Saudi Arabia initiating an oil price war.

However, as the outbreak of the coronavirus continues to drag on economic growth, and particularly dampen demand for oil products, the association expects a gloomy medium-term outlook for the tanker market.

“The outbreak of the coronavirus has impaired major economies around the world and slowed down demand for oil products. The oil price war is temporarily offsetting this slowdown of crude oil tanker demand, but this will only underpin the market for so long, and the outlook is not shaping up positively in the medium-term,” Sand said.

”In recent years, the oil tanker market has, to a large extent, been driven by external factors. While other shipping markets instantly suffer from the fallout of the coronavirus crisis, the crude oil tanker market has yet to feel the same pain, thanks to the massive fall in oil prices, reflecting yet another external factor.”