“If Cushing continues to fill, oil producers will start looking at some (of those) other areas to store their crude. And with 200 million barrels still available, oil producers could continue to add a million barrels a week for nearly 4 years before crude oil storage is actually full,” says Rapier.
Tuesday, March 31, 2015
Oil Glut Doesnt Mean U.S. Running Out of Crude Storage Capacity
Although the U.S. rig count has fallen dramatically, reaching the lowest level since April 2011, domestic crude output continues to soar. At last count, total US crude stocks stood at 468 million barrels, according to the International Energy Agency (IEA) report issued on March 13.
Seizing the theme that petroleum production from conventional and shale deposits has yet to show signs of a slowdown, the collective media narrative portends an apocalyptic future where “U.S. oil glut will fill storage” – leading to a classic Econ 101 supply-demand model where the price of crude collapses to $10 to $20 a barrel.
The IEA says the principal storage hub in Cushing, Ohlahoma held 49.2 million barrels by end-February, equating to 70% of total working storage capacity at the nation’s largest hub.
Given ballooning crude stocks, is America truly running out of places to store all this crude?
Contrary to the vatic utterances by headline seeking “talking heads,” we are not running out of storage capacity – and E&P companies will not be forced to sell crude at give-away prices.
In “The Truth about U.S. Crude Storage,” a percipient Robert Rapier, managing editor at Energy Trends Insider, reminds us that Cushing isn’t the only place crude oil is stored: