KBRA Releases Research – Coronavirus (COVID-19): Winners and Losers in the Face of an Oil Storage Crisis

Kroll Bond Rating Agency (KBRA) releases a new report on the energy industry as participants continue to grapple with commodity price volatility brought on by historic coronavirus (COVID-19) demand destruction and oversupply.

In the report, KBRA details the emergence of a new theme—crude and refined product storage capacity is now one of the most valuable resources around. History was made on April 20 when WTI futures briefly traded in negative territory, largely as a result of storage shortages.

With 50 million barrels of Saudi oil destined for the U.S., upstream operators scrambling to offload production, and willing buyers sidelined with nowhere to store inventory, the global hunt for storage capacity has intensified. KBRA also examines the impact of the new market dynamics and provides insight into the variety of credit implications across the shipping, corporates, and project finance and infrastructure (PF&I) sectors.

Key Takeaways

  • Shipping companies with spare spot charter capacity for tankers have secured record-high rates as the market looked to tankers as floating storage.
  • Select midstream companies could benefit in the short term, although available oil storage is often a small portion of overall business and the upside is limited. Exploration and production (E&P) and oilfield services companies, however, have nothing to gain and everything to lose.
  • The impact on PF&I and secured vessel transactions depends on the individual structure as well as mix of operations.

Click here to view the report.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe Limited is located at 6-8 College Green, Dublin 2, Ireland.