Over the weekend, we reported that with the oil industry oversupplied by a mindblowing 20 million barrels daily as roughly 20% of total global output ends up unused in a world economy that has ground to a halt, and instead has to be parked in storage either on land or sea, the unthinkable is about to happen: oil storage space is about to run out, and as that happens the price of oil will continue sliding ever lower and lower until it finally goes negative as some such as Mizuho's Paul Sankey predict it will, over the next few months, leading to an unprecedented shockwave across the global energy market.

Then overnight, more eulogies for the oil market emerged, with Bank of America writing that oil has now slumped "into the abyss" and it expects to see the "steepest decline in global oil consumption ever recorded, with our base case reflecting a 12mn b/d drop in 2Q20 and a 4.5mn b/d contraction on average for the year" and on a net basis, BofA now expects global oil demand to contract by almost 17mn b/d in April with consumption recovering modestly into 3Q20 and beyond.

The bank also adjusted its oil price forecasts for 2020 and 2021 down to $37 and $45/bbl for Brent and to $32 and $42/bbl for WTI respectively, but in the near-term, it sees both benchmarks temporarily trading in the teens in the coming weeks.

However, by going all "there will be blood" on oil, BofA has only caught up where Goldman has been for the past two weeks, ever since it predicted that the "physical end was near." Meanwhile, in a note of unprecedented gloom, Goldman now says that "the physical end is here" as the coronacrisis goes global.

As Goldman's Jeffrey Currie calculates, the oil surplus generated by an unprecedented demand shock has begun to hit physical constraints at refineries, pipelines and storage facilities, "leading to at least 0.9 million b/d of announced shut-ins at the wellhead, with the true number likely higher and growing by the hour."

With social distancing measures now impacting 92% of global GDP, the ultimate magnitude of these shut-ins which is still unknown will likely permanently alter the energy industry and its geopolitics, restrict demand as economic activity normalizes and shift the debate around climate change.

In other words, what is taking place now is "not only is this the largest economic shock of our lifetimes" but from a practical perspective, "carbon-based industries like oil sit in the cross-hairs as they have historically served as the cornerstone of social interactions and globalization, the prevention of which are the main defense against the virus."

Accordingly, oil has been disproportionately hit, likely more than 2x economic activity, with demand this week down an estimated 26 million b/d or c.25%.

As a result, and picking up on what we said over the weekend, Goldman now warns that "this shock is extremely negative for oil prices and is sending landlocked crude prices into negative territory." Of course, it is only a matter of time before this ultimately creates an inflationary oil supply shock of historic proportions because so much oil production will be forced to be shut-in, but first we need to see prices close to zero... or below it.

Currie next focuses on the storage conundrum we discussed yesterday, and how - as we warned - this will lead to negative oil prices:

The global economy is a complex physical system with physical frictions, and energy sits near the top of that complexity. It is impossible to shut down that much demand without large and persistent ramifications to supply. The one thing that separates energy from other commodities is that it must be contained within its production infrastructure, which for oil includes pipelines, ships, terminals, storage facilities, refineries, and distribution networks. All of which have relatively small and limited spare capacity. We estimate that the world has around a billion barrels of spare storage capacity, but much of that will never be accessed as the velocity of the current shock will breach crude transportation networks first, which we are already seeing evidence of around the world. 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.

The good news, however, is that from the devastation that will follow in the coming months, a new - and far more viable - industry will emerge, or as Currie puts it "the current oil crisis will see the energy industry finally achieve the restructuring it so badly needs. We have long argued that it is the supply and demand of capital that matters, not the supply and demand of barrels; as long as there is capital, companies can withstand difficult periods and the barrels always come back."

The rest of his full note is below: