crude storage capacity

[Jay McKinsey + 1,489]

The EIA recently began providing weekly storage capacity reports: https://www.eia.gov/petroleum/supply/weekly/wcrudeoilstorage.xlsx

According to this report the US is only at 60% of capacity not including SPR. Adding the SPR we are only at 50% of capacity. Seems to be a disconnect with all the claims that we are out of storage capacity, although Cushing is filling fast. 

At the current rate of fill we have about 16 weeks of total working capacity available. 21 weeks available including the SPR.

Edited April 24, 2020 by Jay McKinsey

[surrept33 + 609]

I don't know about overall storage, but key chokepoints like Cushing seem like they are weeks away from filling up. Maybe there is "hoarding" of storage by various market participants to anticipate not being lead footed later on.

From https://www.ft.com/content/51d2f6a5-1a71-4c1c-b022-8768fdb72519
 

Quote

 

Cushing, Oklahoma, population 7,800, has a steakhouse, a burrito restaurant and a KFC.

It also has America’s most important complex of oil storage tanks. The prospect that those monumental tanks might soon be full to the brim rocked global markets this week. The US benchmark oil price plunged below $0 for the first time in history, sparking debate and recriminations across the industry that put the humble city in the spotlight.

The terminals of Cushing are the delivery point for West Texas Intermediate crude oil futures, the most active commodity derivatives in financial markets, and therefore the benchmark that informs traders from Houston to Shanghai. “It’s sort of the Mecca of crude oil on this side of the world,” said Thomas Ramsey, chief executive of Houston-based oil infrastructure company ARX Energy, who at a previous company oversaw a tank construction project at Cushing.

Companies such as Plains All American Pipeline, Enbridge and Magellan Midstream Partners have invested heavily to add tanks on the north and south ends of town. Working storage capacity has increased by more than half in the past decade to 76m barrels, according to the Energy Information Administration. The added space has accommodated surging volumes of oil pouring in from shale formations and Canada.

But demand for crude has now dried up in the face of coronavirus lockdowns, with refiners taking just 12.5m barrels a day last week, a quarter less than a year ago. Oil production cuts are only beginning to take hold in response to low prices. As a result, crude stocks at Cushing climbed to 60m barrels last week, EIA reported. Analysts believe it, and many other tank farms, will be full within three or four weeks.

“Concerns about bumping into capacity constraints came up before, but never so visibly and never so concretely,” said Antoine Halff, chief analyst at Kayrros, which uses satellite images to measure oil storage levels at Cushing and elsewhere. The relentless inflows to Cushing led to an astonishing, through-the-looking-glass moment in the WTI oil futures market on Monday.

After teetering around $10 a barrel, prices for delivery next month were suddenly worth less than nothing. At the end of the day they were worth minus $37.63 a barrel. Negative commodity prices are common in electricity futures markets, where there is little ability to bank a surplus. Their arrival in oil markets reflected the sudden scarcity of storage, which forced futures traders unable to take delivery to get out at any cost.

More than 2.4m barrels of crude is now set to be delivered to Cushing next month in fulfilment of WTI contracts, exchange operator CME Group disclosed on Wednesday. Yet most of the remaining room at Cushing is either leased or needs to be kept open to maintain operations, the consultancy Rystad Energy said. Cushing is connected by more than a dozen pipelines in and out, but options to send oil elsewhere are limited.

These explanations for the negative prices were not good enough for Harold Hamm, a veteran Oklahoma oilman, close associate of President Donald Trump and executive chairman of Continental Resources, a shale oil driller. Mr Hamm sought an investigation into possible market manipulation or computer problems at CME. The “system failed, negatively impacting a significant part of the American economy,” he wrote in a letter to the Commodity Futures Trading Commission. Chicago-based CME rebutted him, saying prices reflected the severe impacts of coronavirus including lower oil demand, an oversupplied market and high levels of oil in US storage. “The futures market worked to perfection,” Terry Duffy, CME’s chief executive, told CNBC.

Mr Duffy’s market has tended to shape the built environment at Cushing. When spot prices are below futures prices, it triggers demand for storage and spurts of new tank building, as happened five years ago.

When spot prices rise the tanks drain and welding contractors look for new work. But building capacity takes time, and the constraints at Cushing can be expected to keep reverberating through markets for the time being — in oil futures and in physical storage prices.

Energy logistics company Blueknight Energy Partners told investors in late March that it had fully leased its 34 storage tanks in the city at double its prior rates. Its biggest customer is Vitol, the world’s largest independent oil trading house, according to a securities filing. As many oil investors and producers nurse losses from the plunge in prices, the “one area within the supply chain that benefits . . . is the crude oil storage market,” Blueknight chief executive Mark Hurley said.

 

 

 

 

 

Edited April 24, 2020 by surrept33

[Jay McKinsey + 1,489]

It does seem like the answer is that storage is being hoarded for later. Maybe when oil hits $-100. Or maybe they bought at -30 and will be taking delivery in May.

Edited April 25, 2020 by Jay McKinsey

[Ironflimmer + 18]

There might be empty storage, but it might not be available to other than the present owner/lease of the storage.

In Cushing, the present available storage is on a long term lease, so it cannot be used by others. Apart from that storage, Cushing is basically almost entirely full.

[Ding Ray Chung + 8]

How hard is really to bring new storage online? We’ve been hearing for weeks now how storage is such a big problem, as if these tanks are some kind of precious rare treasures. China builds whole hospitals in days, with beds, equipment, installations, etc. How hard is it really to install new tanks? That’s a real head-scratcher for me.

[wrs + 893]

12 hours ago, Jay McKinsey said:

It does seem like the answer is that storage is being hoarded for later. Maybe when oil hits $-100. Or maybe they bought at -30 and will be taking delivery in May.

-30 was for people unable to take delivery.

[wrs + 893]

3 hours ago, Ding Ray Chung said:

How hard is really to bring new storage online? We’ve been hearing for weeks now how storage is such a big problem, as if these tanks are some kind of precious rare treasures. China builds whole hospitals in days, with beds, equipment, installations, etc. How hard is it really to install new tanks? That’s a real head-scratcher for me.

It's about like putting in a new refinery but not as bad.  Not enough room left where the pipelines take it and all kinds of hazardous waste risks that have to be addressed in an expansion.  In addtion, this is a one time event that should never happen again and so it would be wasted money.  

[Gini + 7]

15 hours ago, Jay McKinsey said:

According to this report the US is only at 60% of capacity not including SPR. Adding the SPR we are only at 50% of capacity. Seems to be a disconnect with all the claims that we are out of storage capacity, although Cushing is filling fast.

There is a big difference between nameplate capacity and working capacity.  Most tank farms can't fill their tanks above about 75 percent because they need the extra room for blending and transfer operations.  Add to that any tanks that are down for maintenance and you have a recipe for hitting "real" tank top much sooner rather than later...

[Gini + 7]

13 hours ago, Ding Ray Chung said:

How hard is really to bring new storage online? We’ve been hearing for weeks now how storage is such a big problem, as if these tanks are some kind of precious rare treasures. China builds whole hospitals in days, with beds, equipment, installations, etc. How hard is it really to install new tanks? That’s a real head-scratcher for me.

Building storage is expensive and time consuming.  Even if a tank farm had the permitting and contractors already in place and the real estate to do it asap, a 50,000 bbl tank would take a few months and a few million dollars to complete.  Probably a summers worth of work for a few hundred people, welding alone would take weeks.

Edited April 26, 2020 by Gini