June 13, 2016 [OPIS] - While global crude supply has been outpacing demand for the past two years, the U.S. added 34 million bbl (6%) of working crude oil storage capacity between September 2015 and March 2016 to mark the largest storage expansion since the U.S. Energy Information Administration (EIA) started tracking the data in 2011.
The need for all that extra storage capacity was fueled by the contango structure of crude oil pricing (whereby near-term deliveries are discounted versus long-term delivery) in place since the end of 2014, EIA said.
The added 34 million bbl in capacity helped accommodate record-high U.S. crude oil inventories that peaked at 536.5 million bbl through the week ended April 8. Within the period between September 2015 and March 2016, U.S. commercial crude stocks rose by more than 72 million bbl, which by the EIA’s calculations implies crude oil storage usage hit a record 74% of capacity. U.S. crude oil inventories increased in 24 of the 30 weeks from September 2015 to March, and stood at 532 million bbl in the week ended June 3, EIA said.
In order to properly calculate crude oil storage utilization figures, EIA includes crude volumes in transit by pipeline, tanker, barge and rail, and lease stocks. The tally provides a capacity estimate with the same scope EIA uses to determine commercial crude inventories which are used as the denominator in calculating storage capacity utilization, the agency explained.
Even though crude oil storage capacity increased, storage utilization rates in some regions are currently at all-time highs. Storage utilization at Cushing, Okla., the NYMEX WTI delivery point, averaged 88% over the past four weeks compared to 81% for the same period last year and PADD3 (Gulf Coast) storage utilization averaged 73% over the past four weeks after having never surpassed 70% in the previous four years, EIA said.