Crude stocks at top US storage hub rebuild after nearing tank bottoms

Plains All American Pipeline LP

15/12/2023 19:17

By Arathy Somasekhar
       HOUSTON, Dec 15 (Reuters) - Oil inventories at the top
U.S. storage hub rebounded last month after nearing operational
lows, thanks to improved pricing at the hub that pulled in
barrels from Texas' Permian basin and higher Canadian crude
flows, analysts said.
     U.S. crude stockpiles at the Cushing, Oklahoma, hub fell to
their lowest level in 14 months in October on strong refining
and export demand, raising concerns about the quality of the oil
and the potential to fall below minimum operating levels.    
    However, a recent influx of crude from Canada and the
Permian basin has pushed Cushing inventories higher for eight
straight weeks to 30.8 million barrels. Working capacity is
around 78 million barrels.
    "When Cushing nears operations' bottom, prices at the
storage hub elevate compared to Midland and Houston, attracting
barrels into Cushing," said Dylan White, an oil markets analyst
with consultants Wood Mackenzie. 
    Oil flows on Plains All American's  PAA.O  Basin pipeline
from West Texas to Cushing doubled to 537,000 barrels per day,
or 98% of utilization of pipeline capacity, in November from
October, according to Wood Mackenzie data.     
    Pipeline operators typically reduce outflows from Cushing
and boost inflows on the lines they control to ensure minimum
levels of crude in their tanks, adding to inventory levels at
the hub.
    Restocking also was aided by crude oil flowing from Canada
as oil producers there ramped up output in hopes of an expansion
on the Trans Mountain pipeline, which has since been delayed. 
    Pipelines from Western Canada were 99% full in November
compared with 97% in October, Wood Mackenzie data showed.
    Stocks at Cushing are likely to build further in the last
two weeks of the year as companies push barrels to Cushing from
Gulf Coast to avoid year-end inventory taxes in Texas. 
    Prices for crude to be delivered between February and
December 2024 are trading higher than prompt prices, a structure
called contango, that signals excess supply and typically
increases storage levels. 
    "We see the contango structure causing storage build first
and most aggressively in Cushing and then maybe in other
locations," Wood Mackenzie's White added.

 (Reporting by Arathy Somasekhar in Houston; Editing by Josie
Kao)
 ((arathy.s@thomsonreuters.com; +1 832 610 7346; Twitter:
@ArathySom;))