Crude stocks in Cushing, Oklahoma, climbed to 71.3 million barrels (bbls) for week ending March 31, 2017, a record-high level, according to Genscape. Inventories along the Texas Gulf Coast reached a record high in the same week, climbing to 87.2 million bbls. Mounting storage levels put downward pressure on crude prices as Genscape’s Cushing report was released on April 3, and the Energy Information Administration (EIA) reported supporting data on April 5. Stocks could continue to build in the U.S. Gulf Coast as Cushing borders capacity.
Last week’s increase at the Cushing hub marked the sixth consecutive week of builds. Stocks have increased by 6.6 million bbls since week ending February 17. Total capacity before Genscape coverage began in 2009 was around 51 million bbls, indicating that last week’s inventory level was the highest of all time. Inventories at the hub were 395,000 bbls higher than the previous record of 70.9 million bbls set week ending May 13, 2016, and 2.5 million bbls above inventories from the corresponding week in 2016.
Capacity utilization rates at Cushing remained below the highest level, also set on May 13, 2016, due to new capacity that has come online. Operational capacity has increased 691,000 bbls from May 13, 2016, to March 31. The hub utilized 80.5 percent of capacity week ending March 31, compared to a record level of 80.6 percent. Genscape estimates that maximum usable storage capacity is between 80 and 85 percent.
NYMEX Light Sweet Crude (WTI) front month prices fell $0.28/bbl to $50.23/bbl in the hour following the April 3 publication of Genscape's Cushing storage report, which showed that stocks increased to record-high levels.
On April 5, the EIA also reported that Cushing and PADD 3 inventories both rose to record high levels, driving an overall increase in U.S. crude stocks. WTI front month prices fell $0.67/bbl to $51.08 in the hour following the EIA report.
The increase in crude stocks surprised many market participants, as analysts predicted a drawdown in U.S. crude inventories for week ending March 31, according to various sources. Genscape data provides insight into activity at key storage locations in advance of weekly EIA data.
Taking it to the Coast
Inventories in the Gulf Coast and West Texas regions often climb soon after Cushing inventories reach a record high. Texas storage provides an economical option for market participants seeking alternate storage locations when Cushing capacity is limited.
Stocks in Houston, Beaumont-Nederland, and Corpus Christi, TX, climbed through the winter, up nearly 19 million bbls to the record high above 87 million bbls between December 30, 2016 and March 31. Inventories surpassed the region’s previous record high set March 17 by 1.8 million bbls. Despite the record-high inventory level, only 62 percent of operational capacity was utilized.
Total capacity before coverage began in 2014 was around 105 million bbls. It is likely that inventories for week ending March 31 were the highest level of all time, assuming a maximum usable storage capacity of 80 to 85 percent.
Houston stocks increased by 701,000 bbls to 42.5 million bbls week ending March 31, also a record high. Corpus Christi inventories increased 1.1 million bbls to 13.5 million bbls, 632,000 bbls below the record high set on November 4, 2016. Beaumont-Nederland stocks remained relatively flat, down less than 1,000 bbls to 31.2 million bbls, receding from a record high set week ending March 24.
West Texas inventories reached a record high of 19.8 million bbls week ending March 17, utilizing 67 percent of capacity. Stocks at the St. James, LA, storage hub climbed 1.3 million bbls to more than 21 million bbls week ending March 31, utilizing 66 percent of capacity.
Inventories in Texas and Louisiana often increase near the beginning of the calendar year. Barrels typically return to the region after year-end ad valorem taxes incentivize market participants to relocate stocks in December. However, Texas Gulf Coast inventories increased more drastically in recent months than in past years. Stocks posted smaller builds through the first three months of 2015 and 2016, with storage levels up 10.7 million bbls and 10.2 million bbls, respectively, compared to 19 million bbls in 2017.
Genscape-monitored PADD 3 locations were utilizing 63 percent of operational capacity for week ending March 31. This leaves at least 35 million bbls of available storage capacity which could help accommodate further stockpiling as Cushing inventories test maximum capacity. Genscape will continue to monitor crude stocks in Cushing and the Gulf Coast to increase transparency as the inventory glut develops.
Genscape's Cushing storage data is collected using infrared cameras, aerial diagnostics, and other proprietary measurement techniques. This approach translates into highly accurate, advance notice of the actual oil storage levels at Cushing. To learn more or request a free trial of Genscape's Cushing Crude Oil Storage Report, please click here.