An Aramco employee walks near an oil tank at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia. Ahmed Jadallah | Reuters

Global oil storage could reach maximum capacity within weeks, energy analysts have told CNBC, as the coronavirus crisis dramatically reduces consumption and some of the world's most powerful crude producers start to ramp up their output. The coronavirus pandemic has meant countries have effectively had to shut down, with many governments imposing draconian measures on the daily lives of billions of people. It has created an unprecedented demand shock in energy markets, with storage space – both onshore and offshore – quickly running out.

At the same time, a three-year pact between OPEC and non-OPEC partners to curb oil output ended on Wednesday, paving the way for oil producers to ramp up production. OPEC kingpin Saudi Arabia has pledged to hike output to a record high. "Refineries in many places are now losing money for every barrel they process, or they have no place to store their output of oil products," Bjarne Schieldrop, chief commodities analyst at SEB, told CNBC via email this week. He pointed out that when refineries shut down, many oil producers have nowhere to send their crude if the refinery is also part of the logistical chain to the market. "For land-based or land-locked oil producers, this means only one thing," Schieldrop continued. "The local oil price or well-head price they receive very quickly goes to zero or even negative, because if they have too much oil, they must pay someone to transport it away until they have managed to shut down their production."

Landlocked crude prices seen falling below zero

International benchmark Brent crude traded at $25.33 Wednesday afternoon, down more than 3.8%, while U.S. West Texas Intermediate (WTI) stood at $20.54, around 0.3% higher. Both benchmarks recorded their worst-ever quarter through the first three months of the year, according to data compiled by CNBC. Brent futures collapsed over 65% in the first quarter, while WTI slumped more than 66% over the same period. To date, around 862,000 people have contracted COVID-19 worldwide, with 42,404 deaths, according to data compiled by Johns Hopkins University.

Analysts at Goldman Sachs have warned the coronavirus shock is "extremely negative for oil prices and is sending landlocked crude prices into negative territory." The U.S. investment bank estimates that the world has around 1 billion barrels of spare storage capacity, but much of that will never be accessed "as the velocity of the current shock will breach transportations networks." "Indeed, given the cost of shutting down a well, a producer would be willing to pay someone to dispose of a barrel, implying negative pricing in landlocked areas," analysts at Goldman said in a research note published Monday. To be sure, Goldman said it expects waterborne crudes like Brent to be far more insulated from the coronavirus shock, with the international benchmark likely to stay near cash costs of $20 a barrel — albeit with temporary spikes below. In contrast, WTI (which is landlocked and 500 miles from accessible tanker storage) is expected to be among those hardest hit, alongside WTI Midland and Western Canada Select (WCS). Earlier this week, the price of WCS was quoted as low as $4.18 a barrel, traders told CNBC's Brian Sullivan. That's thought to be less than a good pint of beer in Canada.

Storage capacity to hit its limit 'by midyear'

"With demand collapsing but supply rising after OPEC and non-affiliated Russia failed to reach a production cut agreement in early March, global inventories could reach their maximum capacity within weeks," analysts at Eurasia Group said in a research note published Monday. "Industry participants are saying it is virtually impossible to find conventional onshore tanks. Even if OPEC and other producers start restricting their output again soon, the supply overhang from the global lockdown is so big that storage capacity will likely hit its limit by midyear." "Already, ports and refiners are turning away oil tankers. This will put even more downward pressure on prices and pose an existential threat to many companies," Eurasia Group said.

Dock workers haul the mooring rope of a cargo ship onto the dockside at Bandar Imam Khomeini (BIK) port on Friday, May 24, 2019. Ali Mohammadi | Bloomberg | Getty Images