where does oil "go" when it is oversupplied?

[nereo]

Seems like a simple question, but I've been unable to find a satisfactory answer.

I keep reading that global oil production currently outstrips demand, and that we are currently producing ~3MBD (million barrels/day) more than demand.  I also read that oversupply is forecasted by many to continue through all of 2016.  That could be an oversupply well north of 1B barrels just in the next 12 months.

So my question:  Where does oil go when it's overproduced?  I'm imagining fields of huge oil tanks and parking-lots filled with oil barrels. I'm aware of places like the strategic petroleum reserves, but my understanding is that the US version (the largest in the world) holds ~3/4B barrels, and is currently mostly-full.   If that is the case, how much global capacity is there left to store oil?  At what point do we run out of places to put oil that's being overproduced?   Then what...?

[use2betrix]

Tanks, ships, and underground caverns. Major oil/gas companies are currently building many new facilities/tank farms to store oil. They also have huge salt caverns thousands of feet below the earth that they hollow out to hold product. Some of these individual caverns are capable of holding over 1 million barrels of oil. Some cavern sites have many Caverns on each site. So you figure 5 caverns, 1 million barrels per cavern.. It really adds up.

[protostache]

Well, some of it just sits in tankers but that is really just a momentary backlog. I think it made the news last month when there was a whole day of supply sitting around.

Mostly it's just a way of expressing the fact that more supply leads to a lower price. It's not like supply outstrips demand *that* much, taking into consideration that the US uses 19 million barrels of oil per day all on it's own, which doesn't include China, India, or Europe.

[former player]

My understanding is that there is a bottleneck at the oil refineries - if they can't sell it on to customers at the pumps, etc, they don't take it in, which leads to the crude oil tankers stacking up until production slows up to meet the new level of demand.

Governments usually keep some strategic supplies of refined oil hanging around in places that they don't advertise much.

[tarheeldan]

Add above-ground storage and Trixr606 had it right.

You mentioned the strategic reserves, which are 695 million barrels - with a capacity of 713.5mb, so there's room there. These are in various facilities in Texas and Louisiana.

The major commercial storage hub is Cushing, OK - the delivery point for the NYMEX WTI futures contract, and there's tons of storage on the Gulf Coast. EIA recently estimated these combined are 70% full:
https://www.eia.gov/todayinenergy/detail.cfm?id=23992

Here's Cushing:
https://www.dropbox.com/s/7jcs7soewdljfsg/cushing.png?dl=0

And overall US commercial stockpiles:
https://www.dropbox.com/s/k04kh22a5b98hyw/us_crude.png?dl=0

But globally, when there's enough of a carry in the futures forward curve to warrant storage (price differential between prompt and out month is greater than storage costs including financing etc), that can be on land (cheaper) and, if the carry is strong enough, maritime as well.

China has built up a lot of storage capacity and there's a bunch coming online elsewhere. Here are EIA's projections for growth in oil stocks:
https://www.dropbox.com/s/9243861iyqg8tch/sd_balance.png?dl=0

But the Paris-based IEA recently said there's 230mb of storage capacity additions that'll help soak up the forecast builds over the next year.

ETA: underground storage e.g. salt caverns is, in my experience, more closely associated with natural gas and natural gas liquids (NGL) storage, including propane.