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Inventories at 88% of working capacity

Production may be slowing in the United States, but the builds to crude oil inventories are not. The Department of Energy (DOE) reported gains for the tenth straight time in its Weekly Petroleum Status Report for the period ended March 13, 2015. This is also the eighth straight week we have achieved an unofficial new record for crude inventories. The data is the highest on record for Bloomberg data, while the DOE says the levels are the highest “in at least 80 years.”

The latest gain of 9,622 MBO does not include the purchase of 5,000 MBO by the Strategic Petroleum Reserve last week. The current stockpile of 458,508 MBO represents gains of more than 76,000 MBO since the beginning of the year (average gains of more than 7,600 MBO per week) and is about 20% higher than the total of 382,393 MBO on January 2.

cocTotal United States working storage capacity is 521,000 MBO, according to a report from the DOE. With the latest build, inventories are at 88% of working capacity. The Cushing facility in Oklahoma, the delivery point for future contracts, is also running out of room. According to The Wall Street Journal, Cushing is at 77% working capacity and has only 16,400 MBO remaining. This is up steeply in comparison to last week’s percentage of 67% and February’s percentage of 50%.

The storage levels are running along the same amount as refinery utilization rates, which have been hovering around the 88% mark for months. Crude imports also averaged 7,500 MBOPD last week, the highest amount in three months. Speculation of $40/barrel became more popular following the announcement, which will likely only prompt more independent companies to sell their product on the futures market.

“If you don’t have an immediate market for it, you’re going to store it,” said Donald Morton, senior vice president for Herbert J. Sims & Co., in an interview with The Wall Street Journal. “Right now they’re filling every bucket they can find.”

At this time of writing, futures prices for August 2015 and January 2016 were trading about $7.00 and $11.00, respectively, above the current West Texas Intermediate price of $42.50. Crude prices would jump roughly $2.00 following a bullish speech by Federal Chairwoman Janet Yellen.

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