Oil Storage

http://www.bloomberg.com/news/articles/2015-02-25/here-s-why-rising-u-s-oil-supplies-aren-t-overflowing-tank-tops


(Bloomberg) -- It looks like there’s more space to store oil in the U.S. than previously thought.
The Energy Information Administration pegged crude storage capacity at refineries and tank farms in the U.S. at 521 million barrels at the end of September. With inventories rising 8.4 million barrels last week to 434 million, it may appear at first glance as though supplies from the shale boom are on a collision course with tank tops.
Not so, says the EIA. The weekly storage numbers include a few sources that aren’t included in the capacity report, such as crude in pipelines and at well sites, that can add up to more than 100 million barrels.
“We still have a way to go before we can consider ourselves to be full,” Rob Merriam, the EIA’s manager of petroleum supply statistics in Washington, said by phone. “Once you correct for line-fill and lease tanks, we’re pushing about 60 percent capacity utilization.”
Stockpiles are surging amid the highest U.S. production in more than 30 years, helping cut the price of West Texas Intermediate crude by more than half from its peak last year. The grade settled today at $48.17 a barrel on the New York Mercantile Exchange.
The EIA doesn’t ask companies how much oil they have in pipelines. It’s possible to infer an estimate, though.
In September, companies told the EIA they had about 234 million barrels of crude in tank farms and pipelines. In a separate survey companies said they had about 147 million in tank farms. That leaves about 87 million barrels of crude in pipes.

Lease Storage

The number may be higher now. Since the end of September, companies have opened several new lines, such as Enterprise Products Partners LP’s Seaway Twin.
The EIA doesn’t ask companies to break out tank farms from pipelines on a region-by-region basis, so the analysis can only be done on a national level.
Then there are the crude inventories being held in tanks at leases, where the oil is pumped out of the ground. Those aren’t included in the refinery and tank farm capacity report, either.
As the shale drilling boom has expanded the number of new oil wells in the U.S., supplies at those sites has grown from about 18 million barrels at the start of 2010 to more than 32 million in November.
Weekly storage numbers include Alaskan oil in transit on tankers, which can be another couple million barrels. All in all, it can be more than 130 million barrels in storage that don’t show up on the capacity report.
Also, the EIA asks companies to include in their storage figures not only the oil in tanks and refineries, but the amount they have in transit outside of pipelines, including on tankers, barges or train cars.
Add all that in, and storage utilization falls from 83 percent to about 60 percent.
To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Charlotte Porter