Change of U.S. crude oil stockpile situation

Increase of crude oil stockpile in the United States is depressing prices recently. Market players previously only focused on stockpile in Cushing, but the situation about the U.S. crude oil supplies seem to be changing.

The latest commercial crude oil stockpile in the U.S. nearly reached to 400 million barrels of the highest record, according to the weekly report released by the U.S. Energy Information Administration. The stockpile level is about 80% of current U.S. working crude oil storage capacity. The level was below 70% of the storage capacity in the beginning of this year.

The increase tendency of crude oil stockpile in the U.S. is of course triggered by steady growth of domestic production. Although crude oil throughput in the country has been higher level compared to several years ago, the growth of crude oil production is much faster than that.

Current crude oil supply in the U.S. is concentrated in the Gulf of Mexico area. Total crude oil stockpile as of the end of April in the U.S. rose 1.0% from a year ago. On the other hand, stockpile in the Gulf of Mexico region rose 10.1% on year, while that in the Midwest fell 18.7% from a year earlier.

The contrasting movements were caused by pipeline flows. Previously, crude oil was typically imported into the Gulf of Mexico area then transported to the Midwest through pipelines. But recently, increasing inland outputs are supplied to the gulf region oppositely.

The change of industry and social structure weigh on petroleum demand in the U.S. Fuel conversion to cheaper natural gas also accelerate the tendency.
Meanwhile, U.S. refineries are aggressive to export petroleum products, since their prices are competitive because of cheaper WTI crude oil than global index Brent. Crude oil processing in the Gulf of Mexico area is 10% higher from a year ago. Despite the refinery utilization rate exceeds 90%, larger crude oil supplies are lifting stockpile in the region apparently.

Crude oil imports into the Gulf of Mexico has declined by more than 2 million barrels per day from the levels during 2000s, but it still seems excess.

Current stockpile of crude oil in the gulf area is about 80% of the regional storage capacity. It suggests that the increasing supply through pipelines from the Midwest may cut tanker imports further or encourage the discussion to abolish the export ban for crude oil.

The Obama administration recently postponed decision on the construction of new Keystone XL pipeline that will carry more crude oil from Canada. Many people are discussing environmental issue about the new pipeline, but critical storage problem is also likely to be seen if the new crude oil flow comes into the U.S. without solving export ban.