USGC crude inventories reach record levels

Crude oil inventories on the USGC reached 207.2 million bbls on 11 April, a record high. The elevated inventory levels are the result of the continuing strong crude oil production growth, the opening of TransCanada’s Marketlink Pipeline, and a drop in crude oil inputs at USGC refineries as a result of seasonal maintenance.

Weekly EIA crude oil inventory data includes inventories at tank farms, refineries and in pipelines. Total working crude oil storage capacity on the USGC totalled 273.3 million bbls as of 30 September last year. Tank farm storage accounted for 200.5 million bbls of that capacity, and storage at refineries accounted for 72.9 million bbls. The EIA does not include pipeline capacity in its working storage capacity estimate.

Crude build up

USGC crude oil inventories typically build during the beginning of the year, but this year’s increase has been particularly notable. On 10 January, USGC inventories were 161 million bbls, 1.4 million bbls above the five year average. Since then, they have increased 46.2 million bbls to the current level, which is 24.2 million bbls above the previous five year average, and 22.2 million bbls above year ago levels. Typically over this period, USGC crude oil inventories build only 23.4 million bbls.

The main reason for the recent crude oil inventory builds, on the USGC is startup of TransCanada’s 700 000 bpd Marketlink Pipeline, which runs from Cushing, Oklahoma storage hub to the Houston, Texas area. In late January of this year, TransCanada completed the first delivery of crude oil via the link to USGC refineries. Trade press has since then reported that crude oil deliveries via the link are expected to average 525 000 bpd this year. The pipeline startup has been a main driver of recent corresponding draws at Cushing.

A seasonal drop in crude oil inputs due to maintenance at USGC refineries has resulted in lower demand for crude oil in the past two months. For the four weeks ending 17 January, crude imports at USGC refineries were 8.3 million bpd. Inputs then fell to 7.7 million bpd on average for the four weeks ending 21 March, but have increased again in recent weeks. During the same period, crude oil imports actually increased slightly.

Supply sources

Additional crude supply sources on the USGC coming from rising in region production have kept inventories generally high in recent years. In the 106 weeks since March 2012, USGC inventories have been above the previous five year average in all but seven of those weeks. That coincides with a period during which crude oil production growth in the USGC has averaged about 584 000 bpd. Likewise, crude oil production growth in the Midwest has averaged 278 000 bpd from March 2012 – January 2014. With more production on the USGC and transportation of Midwest crude to the region, more storage capacity has been required to meet these logical challenges. 

Adapted from a press release by Claira Lloyd.

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