According to the US Energy Information Administration (EIA), crude oil inventories reached a record level of 215.7 million bbls on 9 May 2014. Since then, they have remained near historically high levels.
Higher inventory levels have been attributed to the logistical changes that have enabled crude to flow more freely from the Cushing, Oklahoma, storage hub and crude production centers to refining centers on the Gulf Coast. However, the EIA has highlighted that, when stated as days of supply of regional refinery throughputs, inventories are much closer to historically typical levels, consistent with the operating requirement of increased crude processing at PADD 3 refineries.
Gulf Coast refineries have been running at near record levels for much of 2014. Crude inputs at Gulf Coast refineries averaged 8.1 million bpd through May, an increase of 0.5 million bpd compared with the same period in 2013. Price-advantaged crude oil and natural gas feedstocks have encouraged high utilisation rates at PADD 3 refineries. Crude oil distillation capacity additions have also supported higher crude runs. All other factors being equal, increased refinery crude runs increase crude inventories required for operations.
While absolute levels of crude inventories on the Gulf Coast have been 11.2 million bbls higher on average year-to-date in 2014 than over the same period in 2013, on an average days-supply basis, the 2014 year-t0-date average of 23.8 days is unchanged from the 2013 level. The EIA emphasises that even when Gulf Coast crude oil inventories reached an absolute record of 215.7 million bbls on 9 May, supply of 25.7 days was only 0.6 days more than the five-year average.
Additional storage capacity
Market participants have been adding storage capacity in order to accommodate increased inventories. According to the EIA, as of 31 March, total working crude oil storage capacity on the Gulf Coast was 275.4 million bbls. This represents an increase of 2.1 million bbls (0.8%) on six months earlier, and a rise of 5.1 million bbls (2.1%) from March 2013. Of the total working storage capacity on 31 March, 202.3 million bbls was at crude oil tank farms and 73.1 million bbls at refineries.
According to the EIA Working and Net Available Shell Storage Capacity report for May, on 31 March Gulf Coast crude inventories were 199.3 million bbls, or 72% of available capacity. This utilisation rate was up compared with 68% (186.2 million bbls) in the last survey and 69% (186.4 million bbls) a year ago. However, actually utilisation was likely lower than that, because EIA inventory data include volumes in pipelines, while storage capacity does not include pipeline capacity.
Adapted from a press release by Emma McAleavey.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/19062014/alternative_inventory_metrics_739/