Monday Morning -- Another Spill, Not The Bakken

This is a quick note I sent Don early this morning:  When I went to bed last night (early) I noted that oil futures were down only slightly; this morning, they are up, slightly. I assume that is due to the spill in the Houston channel. Sixty ships are waiting off-shore to unload oil. If the refineries along the coast don't get that oil, gasoline will go up in price, I would assume. Could help Bakken oil, spot price, and Buffett's railroad. (Note: oil futures continue to drift -- like the oil spill, I suppose -- upward.)

Active rigs:

	3/24/2014	03/24/2013	03/24/2012	03/24/2011	03/24/2010
Active Rigs	198	187	206	171	103

RBN Energy: Cushing crude oil stockpile heads to the coast.

Cushing crude oil inventories have fallen by 28 percent from 42 MMBbl on January 24 to less than 30 MMBbl on March 14, 2014 according to Energy Information Administration (EIA) data. Since the startup of TransCanada’s Cushing Marketlink pipeline at the end of January, outgoing crude pipeline capacity has exceeded inbound supplies at Cushing and the surplus has been headed to the Gulf Coast. Backwardation in the futures market has also encouraged shippers to move supplies out of storage. Today we begin a new series looking at the Cushing exodus and the resultant growing Gulf Coast stockpile.

We have previously blogged about Cushing crude inventory levels – most recently in August of 2013. Cushing is the largest crude storage hub in the US (excluding the strategic petroleum reserve) with a nameplate capacity of about 76 MMBbl (source: Genscape) owned by 14 different private companies. Cushing is also the most active oil trading hub and the delivery point for the CME NYMEX West Texas Intermediate (WTI) Futures contract. WTI also acts as a benchmark for US domestic crude pricing. There are significant flows of crude into Cushing along pipeline routes from Canada, Chicago, the Rockies, the Anadarko basin and the Permian Basin and significant outbound flows on pipelines to refineries in Ohio, Oklahoma, Kansas and Texas as well as major trunk lines to the Gulf Coast.

The dramatic increase in US domestic crude oil production in the past 3 years meant the Cushing hub became the center of an inventory roller coaster as new supplies searched for routes to market. Figure #1 below shows EIA Cushing crude stocks over the period from the start of 2012 through last week (March 14, 2014). At the start of that period Cushing inventories increased from 28 MMBbl in January 2012 to a record 52 MMBbl a year later (green dotted oval on the chart), largely as a result of an excess of supply over refinery capacity in the Midwest.  Those excess supplies came from new domestic production in North Dakota and the Rockies as well as increased Canadian output. The crude surplus could not find it’s way to Gulf Coast refineries because of a lack of pipeline capacity south from Cushing.

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A Note to the Granddaughters

(There may be more notes to the granddaughters than usual because my wife is in California and this helps her keep in touch.)

I would say last night's "Cosmos" was even better than week 2. Week 2, if you remember was on DNA, and although they tied it into "Cosmos," the average person might not get the connection. Olivia even talked about that last night. Olivia loved last night's program as did Arianna. Arianna, of course, knew that Halley's comet came every 75 years, though I told her it was 76 years and that was said on "Cosmos." However, looking it up on wiki the correct answer is that Halley's comet comes "every 75 - 76 years."  Splitting hairs. Arianna was as correct as "Cosmos."

Much discussion on Hook, Halley, and Newton. I did not know the history. Very, very good presentation. They said Halley did not discover Halley's comet. Both Arianna and I agreed, not quite accurate. It is true that the ancient Arabs/Turks mentioned that comet, so they discovered it, but it was Halley who noted that different comets described many times over the centuries was the same comet, and it was Halley who discovered they were all one and the same comet. Besides, that comet had his name on it.

Finally, after the program, we discussed:

• English: star
• Latin: stella
• Greek: aster

I noted that "stellar" in English comes from "stella" (star), meaning wonderful. I also mentioned "stellate."

"Cosmos" said ancients associated bad things, plagues, volcanoes, etc, with "bad stars," or comets. Halley's comet preceded the plague, for example. So, "dis" (bad) and "aster" (star) makes for a bad star ("disaster").

I asked the girls what words they could associate with aster. Olivia immediately said "asteroid." Without missing a beat, Arianna said "asterisk." I noted the flower, the aster.

Olivia then changed the subject and went back to "dis" suggesting that it was associated with other words meaning "bad," like "dislike." She said that in a very authoritarian voice, much like Arianna does.