The Trump administration yesterday announced new sanctions on Russian oil companies. That caused a jump in global oil prices today of somewhere around 5%. Still, the price of oil is down significantly for the year as drillers keep pumping oil faster than the global economy consumes it.

So much so that the International Energy Agency predicts production to outstrip demand by a record 4 million barrels per day by next year.

OPEC and the U.S. are producing a lot, and “You have also emerging production coming from places like Guyana and Brazil,” said Tom Seng, a professor of energy finance at Texas Christian University. “So I don’t know if I want to call it a glut, but certainly an oversupply relative to demand going on presently.”

Seng said much of that oversupply gets loaded onto oil tankers destined for… question mark.

“Some of these literally sit offshore until the price goes up,” Seng said.

The tankers basically turn from modes of transit into storage facilities. Shipping analyst Ed Finley-Richardson said you can see this on satellite images of oil shipping hotspots.

“Where you have dozens of tankers, which are barely moving for months at a time. And it's a lot like a parking lot full of old cars,” Finley-Richardson said.

Except that right now those old cars are collectively holding about a billion barrels of oil. That’s the most offshore storage since early in the COVID pandemic when oversupply briefly pushed oil prices negative in some places.

“There was a really big concern that all the storage facilities like in the U.S. were gonna overflow because consumption dropped drastically, 'cause nobody was driving anywhere,” said Ellen Wald of the Atlantic Council.

We’re nowhere near that situation now. But Wald said there’s another place surplus oil tends to go in times like these.

“Countries start to refill their stocks,” said Wald.

The U.S. and China have both been buying cheap oil and setting it aside in their national reserves. But it’s unclear how much demand for that oil will exist in the future.

“Around the world, electric cars are really taking off,” said energy researcher Amy Myers Jaffe at New York University.

She said that includes in the world’s biggest auto market. 

“One in two cars sold in China today are electric,” said Jaffe.

So, the oil parked on all those tanker ships could be floating there for a while.