Reason #35 Why I Love To Blog -- March 24, 2015

 Updates

March 25, 2015: more on that crude oil storage shortage -- Bloomberg is reporting:

Just as Wall Street says the U.S. is running out of room to store oil, it turns out there’s another 20 million barrels of empty space. 

Where? Right at the top of the tanks. 

A supply glut has dragged U.S. crude for May delivery almost $10 a barrel below contracts a year out. This market structure, known as contango, has encouraged traders to shove the most oil in 80 years into storage so they can sell it for more in the future. The problem is, tanks are filling up, according to banks from Bank of America Corp. to Citigroup Inc. and Goldman Sachs Group Inc. That’s where the extra space comes in.

There’s the normal “working” capacity. And then there’s “contingency” space, a buffer between the working storage and the tank tops that typically sits empty to keep oil from spilling out. The company that built most of the tanks at Cushing, Oklahoma, the biggest U.S. oil hub, says the buffer is about 3 to 5 percent of storage space. That’s equivalent to about 20 million barrels of room in tanks across the country.

Original Post

 

On March 8, 2015, I was curious about all that talk about US crude oil storage reaching capacity by May, 2015, if not by April, 2015.

The post at the link had this screenshot:

 So, now we have this story today, Business Insider is reporting:

Crude oil storage inventories in the US are at their highest levels in decades. Is that going to cause the price of West Texas Intermediate crude to crash?

Probably not, according to Robert Rapier of Energy Trends Insider.

In fact, we're not even close.

Rapier writes that "oil producers could continue to add a million barrels a week (which is about the average over the past year) for nearly four years before crude oil storage is actually full."

The best-known storage facility, in Cushing, Oklahoma, would run out of space much sooner than that at the current rate (about four months from now). But that still isn't going to happen, according to Rapier:

We are currently in the season when refinery utilization is lowest. Refiners take equipment offline in fall and spring to do maintenance, so they use less crude oil at this time of year. This maintenance usually peaks in March, and then crude oil demand picks back up as refiners gear up for the summer driving season. The difference in refinery demand between this time of year and summer is generally around a million barrels per day, so even if nothing else changes that storage build should start to flatten.

In other words, we may have already hit peak crude storage here in the US, and if not, we're getting very close. 

So incredibly interesting.