WoodMac: US record crude stocks set to decline

US crude oil stocks have grown over 30 million bbl each month so far this year, leading to a series of record highs and most recently reaching an estimated 471 million bbl of crude on Mar. 27, yet Wood Mackenzie analysts calculate the US has about 200 million bbl of unused crude storage capacity.

Afolabi Ogunnaike, WoodMac senior research analyst for Americas refining and oil product markets, said he does not expect the US to run out of crude storage.

“On the contrary, we anticipate that the uptick in refinery crude runs and exports will exceed the growth in supply eventually leading to stock withdrawals,” he said.

WoodMac forecasts refinery crude runs will rise significantly in April as refineries exit seasonal maintenance and ramp up processing for the summer driving season.

“Refinery crude runs could increase over 1.7 million b/d from the spring lows to the summer high and set new records,” he said. The ramp up in crude runs is expected to be the largest factor impacting the trajectory of US crude stocks.

“As US refineries increase their throughputs, we anticipate they will also increase their imports of crude oil from the March 2015 levels,” Ogunnaike said.

Low crude oil prices have contributed to slower growth of US crude oil supply. WoodMac expects this growth will be counterbalanced by increasing exports of crude oil and minimally processed condensate. These exports are supported by a wider differential between premium Brent and West Texas Intermediate.

Although the US has ample crude storage capacity available, Cushing is now about 80% full.

“The April 2015 start up of the 250,000 b/d Cactus pipeline from the Permian into the Gulf Coast is expected to reduce pressure on Cushing,” WoodMac said in an Apr. 1 note.

“This pipeline bypasses Cushing, and moves light crude to the Gulf Coast refining and storage hub. Rising Cushing crude stocks could also reach the Gulf Coast by accessing the 1.55 million b/d pipelines connecting the two regions,” Ogunnaike adds.

He believes record high crude stocks will be pulled down this summer as US refinery crude runs rise over 1.5 million b/d.

Contact Paula Dittrick at paulad@ogjonline.com.

*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.

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