Oil prices have already crashed thanks to the price war between Russia and Saudi Arabia and the COVID-19 virus, but IHS Markit believes things are going to get worse.

In a March 16 note, IHS said the market faces a "historic surplus" of between 800 million and 1.3 billion barrels in the first six months of 2020 if current conditions persist. If that occurs, the firm said, the combination of high production and weakened demand would present a dire situation for the industry.

"Extraordinary conditions can lead to startling outcomes. That is where the oil market now finds itself — in a truly extraordinary situation in what has been a transformative week for the global industry," IHS said. "This situation points to the possible buildup of the most extreme global oil supply surplus ever recorded."

"The last time that there was a global surplus of this magnitude was never," said Jim Burkhard, vice president and head of oil markets for IHS Markit. "Prior to this the largest six-month global surplus this century was 360 million barrels. What is coming will be twice that or more."

IHS said the global oil supply surplus on a monthly basis could vary between 4 million and 10 million barrels per day between February and May. Demand in March and April, the firm said, could be down by as much as 10 million bbl/d. If travel restrictions increase, commuting to and from work diminishes and the global economy slips into recession, IHS believes the surplus could reach the estimated high end of oversupply of 1.3 billion bbl.

"For context, up until now, the largest half-year global surplus since 2000 was in first half 2015, when it was a cumulative 352 [million barrels]," the firm said.

The country most capable of cutting back production quickly, the United States, will likely do so. IHS said the U.S. will likely see the biggest drop in production volumes of anywhere in the world if prices remain low.

"U.S. crude oil production, if and when new tight oil drilling stops, could fall by [2 million bbl/d to 4 million bbl/d] over 18 months," the firm said. "The spread of the coronavirus disease … and related movement restrictions raise the question as to whether oil production and supply chains [will] be impacted owing to lack of workers in key producing areas around the world."