Cushing Crude Oil Storage At All-Time High For Week Ending January 1 -- January 4, 2015

Penn Energy is reporting: Cushing crude oil storage at all-time high for week ending January 1.

Crude inventories at Cushing, OK, reached an all-time high for the week ending January 1, 2016, surpassing the previous all-time high set April 14, 2015, by nearly 347,000 bbls.

West Texas Intermediate (WTI) prices fell $1.65/barrel to $36.60/barrel in the first two hours after the report in reaction to the growing Cushing supply.

The most recent record high was due in part to increasingly favorable storage economics in connection with a widening 12-month price contango structure for WTI. In addition, year-end tax reduction strategies added incentive to move crude into storage tanks at Cushing. The April 2015 storage high was also reached when the WTI price was in a 12-month contango structure.

Capacity utilization at Cushing is currently two percent below the all-time high set in March 2011. Since that time, close to 32mn bbls of storage capacity has been added to the storage hub.

Seven operators at the Cushing tank farm are now above 80 percent capacity utilization, indicating that most of their storage volumes are likely merchant, or leased to others, rather than operational. Genscape considers 80 percent capacity utilization to be an operational maximum.

These seven owners, representing 31.184mn bbls of operational capacity in total, have only 4.745mn bbls of available capacity. Four terminals are currently 70 to 80 percent full with only 6.302mn bbls of remaining capacity.

The final five terminals that are still below 70 percent utilization represent just 32 percent of Cushing’s total capacity and have 9.473mn bbls of capacity available for storage. The available capacity amount does not account for operationally necessary empty space (for blending, pipeline operations, etc.) or contingency tank top space.

At this time, three different companies are expanding their storage infrastructure at Cushing with a combined 1.93mn bbls of capacity under construction. All of these projects are expected to be online by the end of Q1 2016. Currently, 2.276mn bbls of storage capacity is in maintenance. Tanks returning from maintenance could add incremental space in the interim.

Thank goodness for relaxation on rules exporting US crude oil.