The Energy Information Administration (EIA) reported yet another monster build to crude inventories for the week ended February 27, 2015. The latest Weekly Petroleum Status Report added 10.3 million barrels to inventories that are already believed to be the highest on record. Timothy Hess, a Petroleum Expert with the EIA, had recently told Oil & Gas 360® that a combination of companies trading on the future strip price and increased production on a per-rig basis are two main contributors to an inventory that has averaged a build of more than 8.0 million barrels per week since January 16, 2015.
So how much storage capacity do we have left after our largest inventory build since March 23, 2001? According to the EIA, there’s more than 65 MMBO remaining, for 521 MMBO total. In the Administration’s “Today in Energy” report released around the same time as the inventory update, the United States is utilizing only 60% of its capacity when combining its five Petroleum Administration for Defense Districts (PADDs). The main hub consisting of Gulf Coast states (PADD 3) is at only 56% utilization, and even the Midwest (PADD 2) is at 69% utilization.
General consensus from the industry is that most companies are opting to sell production volumes on future strip prices, although it is impossible to pin down an accurate number. The Cushing spot in Oklahoma is the delivery point for futures contracts, is at 67% capacity – still plenty of extra room, but considerably less than its capacity of 50% at this time last year.
Refinery Utilization Continues to be High
Crude oil inputs continue to exceed 15 MMBOPD, considering the United States is importing more than 6 MMBOPD in addition to its domestic production of more than 9 MMBOPD. The volume is keeping refineries busy, running close to 90% utilization. Oil prices remained stable despite the build, and the near-term price may be aided by the fact that gasoline prices crept upwards for the fifth straight week. Since the massive inventory builds began in mid-January, gasoline prices have climbed to an average of $2.42 today from $2.06, or a rise of about 15%.
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