If there's a situation in which the crude oil is in surplus, the producers will face a situation in which the prices will be dropping, thus having less profit from it. In order to solve that, there's two main methods that the producers do:
1. Decrease in price:
Despite this meaning that the producers will have less profit for the same amount of crude oil if sold in normal circumstances, they will have to do this in order to be able to spend the surplus. Once the surplus is spent, they will be able to lift up the price for it again.
2. Minimize the production:
In order to be able to come to a situation where there will be no more building up of surplus, the producers will minimize the production of crude oil. The production will be very small, and it will be smaller than the current demand for crude oil, so that the surplus can be spent.
Producers can react to reduce a surplus of crude oil by reducing the price of crude oil.
Producers can react to reduce a surplus of crude oil by reducing their level of production.
A surplus occurs when the quantity supplied exceeds the quantity demanded. This is usually at the price above equilibrium price.
If there is a surplus and price is reduced, the quantity demanded would increase and this would reduce the surplus. Also, if production is reduced, the surplus would reduce.
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