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US crude oil inventories approach record-high levels

Published by , Editorial Assistant
Tanks and Terminals,

Recent declines in demand for petroleum products have contributed to record increases in US commercial crude oil inventories. Transportation fuel demand has decreased as a result of reduced economic activity and stay-at-home orders aimed at slowing the spread of the 2019 novel coronavirus disease (COVID-19). Refiners have been able to reduce the amount of material they run through refineries (as measured by gross inputs, which includes crude oil, unfinished oils, and natural gas plant liquids) relatively quickly in response to falling demand, but crude oil production has not responded as quickly, leading to large crude oil inventory increases.

From 13 March (when a national emergency was declared in the US) to 24 April, US commercial crude oil inventories increased by 74 million bbl (16%) and are now 8 million bbl below the record-high value set in March 2017, according to data in the US Energy Information Administration’s (EIA) weekly series that dates back to 1982. Commercial crude oil inventories for the week ending 10 April increased by 19.2 million bbl, the largest weekly change in EIA’s data.

The US Gulf Coast region, home to more than half of US refining capacity, typically has the most crude oil inventories. From 13 March to 24 April, Gulf Coast inventories increased by 36.4 million bbl (20%) to 221.6 million bbl. The increase of 10.2 million bbl in the week ending 10 April was the fourth-largest increase in the Gulf Coast region on record.

Inventories in the crude oil storage hub in Cushing, Oklahoma, increased by 24.9 million bbl (69%) from 13 March to 24 April. The weekly inventory builds in Cushing for the weeks ending 3, 10, and 17 April are the three largest weekly inventory builds on record. Because market participants that hold West Texas Intermediate (WTI) futures contracts to expiration must take physical delivery of WTI crude oil in Cushing, the availability of crude oil storage there is important to facilitate the physical transfer. On 20 April 2020, the scarcity of available crude oil storage at Cushing meant several market participants sold their futures contracts at negative prices, in effect paying counterparties to close out of their contracts for them. Another important factor is that a portion of unused space at terminals is required for normal functioning of petroleum storage and transportation systems, and the unused space could be held for incoming crude oil or other operational considerations.

To help stakeholders better assess crude oil storage and capacity, EIA began providing weekly estimates of US crude oil storage capacity utilisation in the Weekly Petroleum Status Report (WPSR). EIA surveys inventory levels weekly, but because capacities rarely change, crude oil storage capacities are surveyed less often. EIA’s most recent Working and Net Available Shell Storage Capacity Report was released in November 2019 with data through September 2019; the next release will be on 29 May 2020, with data through March 2020.

In EIA’s WPSR published yesterday, US crude oil storage has reached 61% of working capacity, up from 60% the previous week. In the Gulf Coast and Midwest, storage capacity utilisation rose to 60% and 65%, respectively. Within the Midwest region, storage utilisation at Cushing, Oklahoma, rose to 81%.

Principal contributors: Matthew French, Corrina Ricker

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