The hunt for oil storage space is on — here's how it works and why it matters

An unprecedented collapse in U.S. oil prices has prompted market participants to reflect on the difficulty and costs of storing crude.

In short, U.S. oil futures posted their largest one-day sell-off ever on Monday as a result of an oversupplied market testing storage capacity, analysts at Goldman said.President Donald Trump said on Monday that he would consider the prospect of preventing incoming Saudi Arabian crude oil shipments in an attempt to ease pressure on U.S. shale producers.With many oil tanks filling up, the U.S.

In any case, if storage tanks are full and it is not possible to store crude on floating tankers at sea, analysts expect producers to start shutting in wells — a process that can physically damage reservoirs and threatens the prospect of reviving future output.Such unprecedented price action has raised some "serious questions," Tamas Varga, senior analyst at PVM Oil Associates, said in a research note published Tuesday.

Among them, Varga pondered: Does the price point to a broken U.S. physical market? Will WTI at Cushing cease to exist as the main price market? And, was the carnage a one-off or is there a chance that the June contract will overtake the role of the expiring front month?

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