Click to enlarge:

Bloomberg.com – Unlocking the Crude Oil Bottleneck at Cushing
The U.S. oil infrastructure is the product of four decades of rising imports and falling domestic supply. As those trends have reversed over the last few years, America’s network of pipelines has failed to keep pace. Designed in part to ferry oil and refined gasoline from the coasts to the interior, those pipelines are now ill-equipped to handle the enormous amount of crude gushing from shale reserves in North Dakota and Texas. Which is why so much of that oil ends up trapped in the central Oklahoma town of Cushing, the primary crude oil storage hub for the U.S. Cushing developed as an oil trading center and then as the official price settlement point for West Texas Intermediate, the benchmark that most types of North American crude are priced against. Cushing is now best known as a bottleneck for the energy industry: Oil rushes in, but trickles out. There are now more than 44 million barrels of oil stuck in Cushing, a record, and 60 percent more than was stored there just five months ago. Overall U.S. crude inventories now sit at a 21-year high. Pipeline companies are racing to build new projects aimed at pushing more oil through Cushing toward refineries as part of a larger effort to revamp America’s oil infrastructure. The first of those projects goes online this week when the flow of the 500-mile Seaway pipeline is reversed. Seaway, with a diameter of 30 inches, was built in 1976 to take crude south from the Texas Gulf Coast north into Cushing. On May 17, about 150,000 barrels of oil will be injected into Seaway at Cushing. Twelve days later, that oil will start arriving in Freeport, Tex., along the Gulf Coast, where refiners can access it. As the pump stations provide more horsepower and increase the pipe’s pressure later this year, the oil will travel faster, taking just five days to reach Freeport and increasing Seaway’s capacity to 400,000 barrels per day by early 2013. By mid-2014, that flow is expected to reach 850,000 barrels a day.

Source: Bianco Research

Category: Energy, Markets, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

32 Responses to “Crude Oil Inventories”

  1. DeDude says:

    And why are we allowing all this American oil to go down to Texas so it can be refined and exported? Would it not be more in the interest of the people of this country if there is a glut of American oil in US, so prices for consumers would get lower. Oh I forgot, this would also reduce the profit that the oil billionaires literally suck out of our country. Maybe that is why the GOP was willing to push the country towards default in order to force approval of another pipeline raising the price of gas for Americans. They couldn’t allow someone from blocking their billionaire donors lucrative fleecing of America.

  2. JMelville says:

    DeDude, spend some time learning about the energy industry, and in particuar refining and marketing of petroleum products. Your knowledge seems limited to driving to the service station and filling up.
    Where are the refineries? Why are many closing? What price must refiners on the gulf coast currently pay for crude oil? How is the crude from the Bakken transported currently and to where? What is the price difference in Bakken crude from what a refiner in Lousisana is paying? It is clear you did not even understand the blog post and the consequences of the of the Seaway reversal.

  3. nebyarg says:

    These infrastructure projects are probably financed privately, but the US certainly needs electric grid infrastructure construction. Visit the US west, which was spectacular, however there was little use of solar/wind in those vast open spaces. Here in Connecticut, there isn’t enough solar/wind for the costs to be economically viable.
    I personally would prefer to spend tax money on education, R&D, infrastructure for advanced technology, like bullet trains, rather than this Homeland Insecurity/DOD/OilWars.

  4. dead hobo says:

    More good news for the USA.

    Europe is ready to crash and burn spectacularly … the only question is how big the fireball will be.

    This additional oil supply plus the higher margins mentioned in the news (I’m not really familiar with the details) that will come into effect soon should help keep the price of oil stable. The ETF investors continually blow up the economy by making oil unaffordable (just before their asset bubbles always explodes). Perhaps this new supply will be just the extra amount that will make the pension funds and hedge funds regard oil the same as natural gas and cause them to take their money elsewhere.

    Stable oil prices without the ETF premium will promote a strong and growing economy in the US, which will lead the world into recovery from the EU’s pending catastrophe.

    (PS I still believe the first part of the current stock drop was due to margin calls from the oil bubble explosion. Greece kind of took over the show a couple of days ago and couldn’t be ignored any longer. I bailed to 100% cash, took a loss on the most recent buy-in, but am planning to jump back in at the bottom and make it up fairly fast. The only question is ‘where will THIS bottom be?’ There’s a part of me that regards Greece more as Bear Stearns, followed by the ECB as Lehman shortly afterward. )

  5. Mike in Nola says:

    It is nevertheless true that the refiners can’t wait to get ahold of more oil so they can export the refined products, not compete on gasoline prices. Meanwhile Texas products are being sent up to the Northeast because refineries there are being closed because they are allegedly unprofitable. Shades of Enron.

    BTW, the post-in-chief basically negates the need for the Keystone XL pipeline. But I doubt that “need” enters into it except for maybe big oil “needing” more money.

  6. JMelville says:

    “Shades of Enron” Please explain. IF refineries so profitable why aren’t folks lining up and building them? It’s got to be easier than launching a social internet site. Natural gas is 5 times cheaper here than in the rest of the world. Why aren’t we exporting all the excess? Must not be any profiut in that.

  7. Westbound says:

    Given that it is illegal to export crude (something I didn’t know until recently), presumably all that Cushing oil will be refined on the GC and sold into the export market.

  8. jib10 says:

    Stop people. The oil is going to the coast because that is where the refineries are, not because it is going to be exported. It has to be refined before it can be used by any one. There are plenty of pipelines carrying refined products from the coast to the rest of the US. The refineries are on the coast because that is where the imported oil comes in and where most of the US domestic crude has been (offshore).

    Refining oil is not simple. I know all you financial type think it is just widgets and any idgit can do it but each oil field (sometimes, each well) has different chemical properties and the refineries are tuned to refine the type of oil they get. It is not just that the pipelines that have to be reversed, the refineries have to be re-tooled to handle the heavy crude from Canada. A lot of the the shale oil is pretty light, clean crude and will be refined in different refineries or different parts of refineries. There are major projects currently running to re-tool and expand old refineries inland. This will be a 10 year process.

    JMelville, you know why we are not exporting NG, and we dont want to start. Having cheap NG is a major industrial advantage for our economy. We should end up with most of the NG intensive industry here in the US. Hell, we might even get back to building real things instead of pushing bits.

  9. SOP says:

    In the nearest future:

    Oil May Fall As Seaway Insufficient To Ease Glut, Survey Shows

    Oil may decline next week on concern that the reversal of the Seaway Pipeline will not be enough to alleviate a record supply glut in the central U.S., a Bloomberg survey showed…

    http://www.bloomberg.com/news/2012-05-17/oil-may-fall-as-seaway-insufficient-to-ease-glut-survey-shows.html
    ——————–

    Keeping things in The Big Picture perspective…

    In the nearer future:

    … By mid-2014, that flow is expected to reach 850,000 barrels a day.

    (850,000 bpd)/18,000,000 bpd) = 4.7 % of (current) US Daily Oil Consumption

    And how much of that will be converted to highly profitable product and sold on International Markets to the Highest Bidder?

  10. SOP says:

    In the Near Term -Looking at the Biggest Picture.

    This Energy Transition places in competition each country in a global market – Geopolitics.

    Within each country it also places in competition corporations vs national interests vs local interests. (note – ‘big oil’ th eBPs/Shell/Chevron etc, etc controls less than 10% of the oil market – the rest belongs to nation’s oil companies)

    Currently “Profit” is the Prime Motivating Factor.

    The Prime Motivating Factor will be changing. “What Happens Then” ???

    see the reports from the militaries and insurance industry (the adults that will have to clean up after the rest of us)

  11. SOP says:

    @JMelville Says:

    Until recently refineries were not so profitable. With the current Disarray in the World Energy markets, it is not clear when or where it would be Profitable to build or modify existing refineries.

    Building or modifying them to handle different grades of crude is Not “easier than launching” Faceplant sites.

    Natural Gas is an Orange – completely different technologies and infrastructure needed. “Why are we not exporting the excess?” – careful what you wish for – they will as soon as they can profit from it.

    —————-

    World Peak Conventional Oil Production has peaked – starting in 2005.

    Ironic because 2005 was also the year that the Army Corp of Engineers’ Report (the Hirsch Report) came out… and it said we needed Twenty Years (20 yr) to prepare for this transition.

    Reading the above article – minus the “exciting” rhetoric – it sounds just like the kind of desperate scrambling expected and described by the world’s militaries’.

  12. Mike in Nola says:

    jib10: actually, the NG producers are starting to make noise about using the NG terminals to export it since they can get more on the world market.

    Shades of Enron: it’s easier to make money by driving up the price through artificial restraints than to have to go throught the trouble of producing product. Artificially limiting the supply of electricity in CA led to blackouts and billions in increased costs to users, but made Enron a lot of money.

  13. JMelville says:

    Refiners on the gulf coast currently source most of their oil from offshore. It is priced at Brent, not WTI. Spreads are ugly. (Note Exxon missed numbers this qtr. due to refining and chemicals). N. Dakota just overtook Alaska as the second leading producer, who saw it coming so soon? The most active sector in energy right now is mid stream, and for reason. The invisible hand is at work, its going to take some time for the end users to benefit.
    Yes Jib10, I know why we are not exporting Natgas, and I also know why BP is planning on building a billion dollar processing plant in W. PA. Cheap gas needs infrastructure and low prices are spurring economic decisions by the players.

  14. DeDude says:

    Yes and the export of that refined product have a substantial effect on the final cost at the pump for regular Americans. So for a lack of pipelines (and willingness of “we the people” to carry the environmental and social cost of making new ones), we have to slow down the depletion of oil up there – catastrophe? For who? Why not just take the time to build the infrastructure to extract, refine and use the oil up north? I guess because then the oil industry goes all “buh-hu why aren’t we allowed to both rob AND rape the American people”. Uuuuh we have a glut and the price of oil is going down, what a disaster – for whom if I may ask?

  15. JMelville says:

    @Dedude.
    Please do go out and find investors to build a refinery “up north”. Or are you suggesting the gummint build it? Should be fun to watch Oilandra work the permitting process with the EPA….

  16. DeDude says:

    @JMelville;

    If the glut gets big enough, the profit from refining up north will get big too – and then someone will try to work their way through the process of building a safe refinery that can get through the EPA. In the mean time the freakin frackin will slow down and we will all be better off. Nothing like using the market forces – even if it is for the benefit of “we the people” rather than just to make some oil billionaire richer.

  17. willid3 says:

    ch isnt the east coast refiners that get their oil from Brent crude? which i priced higher. the plan to send oil south to gulf coast is to export it, to make up for lot sales based on the decline in domestic demand. its been collapsing since about 2008. still is. which means we have a lot oil and refinery capacity, that has no place go domestically. but oddly enough the high pricesd gas on the east coast? is because they use brent oil. which is priced higher. so instea of opening up a pipeline to the gulf, why aren’t we building or opening one to the north? basically the north east refiners are not profitable because they can’t export (and demand is down) and raw material (oil) is very expensive vs wti. and that pipeline from Canada? is also going to the gulf coadt. to e exported (at higher prices than hat it already sells for now up in dakotas and wyoming). if it was to really reduce gas prices, why isn’t going to the north east or west coast? because they will make more money exporting gas etc, than selling it domestically

  18. JMelville says:

    There is no argument that could satisfy Dedude. All in the oil patch are robber barons. He just wants to get his petrol good and cheap. He will decide what a fair price is. Risk and reward = rape and rob. I’ve got news for you, alot of the private equity money helping to finance the stuff you WANT and NEED, is supplied by pension funds, college endowments and the like. In the meantime, go plug in your Volt if it makes you feel better.

  19. DeDude says:

    The main reason they are not asking to build a pipeline directly to the east coast refineries (and cutting down on imports of Brent) is that this would bypass Texas oil billionaires so they could not get their cut of the pie.

  20. DeDude says:

    A good argument would most certainly satisfy me, if I were to be presented with such a thing. But all I see here is condescending “I know better than you, so trust me” BS combined with heavy duty stereotyping, to make sure that your “tribe” get the subliminal message that “he’s is not one of us but a “commie”, so don’t listen to a word”. So far I have not even seen a shallow attempt to explain why it would be in the interest of this country to send our shale oil down to the gulf so it can be refined and exported to other countries. Maybe that is because the only reason it is being done is that certain individuals can harvest a fat profit and nobody actually cares about the country, including the GOPsters who get a nice little slide of the fat as a reward for having sold their country out. Those individuals harvesting the fat profit can try to hide behind grandma’s pension fund, and fairy tales about huge “Wall Street” type risks, but I am not the sucker that will buy into that stuff.

  21. blackjaquekerouac says:

    great comments. interesting how collapsing oil prices get’s the commentariat ™ fired up! i think the theory that “we can export our way out of this collapse” which is now being espoused here “by the right” is as equally mis-placed as it is on the left (no less than the President himself actually.) the fact of the matter is “these collapsing prices are a sign of a horrific economy (ies).” in other words there is a problem with final demand. interestingly “the Federal Government is now in the business of both building motorized vehicles of every type” and as well “providing commercial insurance for entire industries.” VERY interesting indeed. sounds good for production to me!

  22. SOP says:

    Dedude

    “So far I have not even seen a shallow attempt to explain why it would be in the interest of this country to send our shale oil down to the gulf so it can be refined and exported to other countries. ”

    Bottom line – what is dictating where that oil goes is The Market and the current infrastructure.

    Whether or not it is in the best interest of the USA is debatable.

    Right now, it appears that what economists said would happen is happening = Global Demand Destruction at Work – slower economy ahead – fines double in creative destruction zones”.

  23. SOP says:

    JMelville -

    Apologies for my misunderstanding @ my post at 12:04.

    Thank you for your contribution.

  24. DeDude says:

    Armed robbery is also just “free market forces” – people wanting other peoples money and sticking a gun in their face to get it. Yet we have decided to interfere with those “free market forces” because, not doing so, would be harmful to society. Similarly with poisoning the water, air and food supply, illegal because of the harm it does. Demanding that big oil stop acting against the interest of this country is no different from other restrictions on selfish acts that harm others and society.

  25. TheTruth says:

    Let’s not forget the risk to municipal water supplies crossed by the Enbridge-Enterprise Seaway pipeline (stopseawaypipeline.com). Those two companies have a horrible safety record, particularly when reversing the flow in old pipelines and transporting unrefined heavy crude, such as tar sands crude. According to Reuters reports, (http://www.reuters.com/article/2010/09/10/us-enbridge-leak-factbox-idUSTRE68933Z20100910), the 2010 Enbridge pipeline spill in Michigan contaminated 40 miles of the Kalamazoo River. Although Enbridge spent $700M to remove oil from the top surface of the river, there is no known good way to remove it from the bottom of a water supply. Tar sands crude has the viscosity of molasses, requires additions of carcinogenic diluents like benezene, requires higher pressures than conventional crude which increase the fluid temperature to 160 degrees F (where the chemical reaction rate is 8X higher), and contains up to 20X the acid and up to 15X the sulfur of conventional crude. It is certainly much more corrosive than the conventional, refined petroleum now being transported in the Seaway pipeline. The transportation of tar sands crude across public water supplies and their tributaries in 36-year old pipelines should be put on hold until July 2013 when the US Department of Transportation completes its study to determine the risks of transporting diluted bitumen crude.

  26. SOP says:

    “Stop acting against the interests of the country”

    What about the interests of the locals where the oil is produced? What if their interest – as owners – conflicts with what you consider to be in the best interests of the country?

    It is really more complicated than it appears. The point is the “Free Market” forces competition between the “New Citizens” (Corporations ) and nations and the smaller locales. Is it in our best interests to change this system?

    Keep in mind – we (USA) produce only half the oil that we use. We have to import Half our consumption from “Other” nations – and many of their people may feel the same way as you do, about “their” oil..

    We are 5% of the world’s population but we consume about 20% of the world’s oil.

    Also, our oil majors own only 8% or so of the world’s oil reserves – they are competing against national oil companies.

    —————————
    IMO – we are pathetic.

    Having to resort to Shale oil/gas/biomass etc is a pot-head like “scraping the bowl” to get high when he runs out of weed. It is what the losers of WWII tried to do in desperation.

  27. DeDude says:

    Nobody said it was easy to weigh the interests of individuals and small groups against the interest of society. Personally I am all for the idea of reducing our dependence on imported energy and oil in general. It should be done as well.

  28. [...] Crude Oil Inventories at 21-year High | The Big Picture Bottleneck in Cushing, Oklahoma storage hub since pipeline infrastructure ill-equiped to handle [...]

  29. SOP says:

    “no one said it was going to be easy”

    I hear ya ;)

    I think this guy hits the nail on the head. We will have to “manage” our expectations – “needs” vs “wants”.

    Our brains have been hijacked by the fruits of the industrial world.
    ———————

    Nate Hagens: We’re Not Facing A Shortage of Energy, But A Longage of Expectations

    http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CFQQFjAC&url=http%3A%2F%2Fwww.postcarbon.org%2Faudio%2F428634-nate-hagens-we-re-not-facing-a&ei=GVq6T8npDMXw6AHMxJWgCw&usg=AFQjCNGcKALGvP6d6nxRk9XhnyjrMfzl8Q&sig2=x7-SE6cZiUWlKii-B2Lf3Q

  30. March’s avg Retail Price of $3.91/gal is comprised of $3.23 Wholesale refinery product & $o.68 Margin. In turn, Margin is made up of $ .41 Taxes & $o.27 Profit. One would think the retailers are getting very rich, eh. Well, the Gas Pump reveals Margin was only $o.54 in January Y2k. Taxes & Profit were 42¢ & 13¢ back then. In other words, nominal Profit today is virtually unchanged.

    The post-Y2k Crack Spread (diff betw Wholesale & Contract Crude) for Refiners can be seen ranging from $1.03 & $0.10 per gallon ($43 & $4/barrel). Crack Spread is currently $0.56/gallon ($23.70/barrel). When the spread drops below $o.48/gallon ($20/barrel), history shows Refiners prefer to produce diesel from available crude and then import less expensive foreign gasoline. It is this general lack of profitability that underlies the massive shuttering and sell-off of refinery & retail facilities. Improvements in mileage performance has augmented the trend.

    The raw crude component of $2.66/gal continues to be volatile, particularly its sub-components. Mismanagement of federal budgeting (see my Debt Wall analysis) since Barack Hussein Obama’s inauguration had added 50¢/gal to current pump prices via USDollar Debasement. Geopolitical Fear Premium, also calculated by the Barrel Meter, adds another 80¢/gallon.

  31. last month’s avg Retail Price of $3.91/gal is comprised of $3.23 Wholesale refinery product & $o.68 Margin. In turn, Margin is made up of $ .41 Taxes & $o.27 Profit. One would think the retailers are getting very rich, eh. Well, the Gas Pump reveals Margin was only $o.54 in January Y2k. Taxes & Profit were 42¢ & 13¢ back then. In other words, nominal Profit today is virtually unchanged.

    The post-Y2k Crack Spread (diff betw Wholesale & Contract Crude) for Refiners can be seen ranging from $1.03 & $0.10 per gallon ($43 & $4/barrel). Crack Spread is currently $0.56/gallon ($23.70/barrel). When the spread drops below $o.48/gallon ($20/barrel), history shows Refiners prefer to produce diesel from available crude and then import less expensive foreign gasoline. It is this general lack of profitability that underlies the massive shuttering and sell-off of refinery & retail facilities. Improvements in mileage performance has augmented the trend.

    The raw crude component of $2.66/gal continues to be volatile, particularly its sub-components. Mismanagement of federal budgeting (see my Debt Wall analysis) since Barack Hussein Obama’s inauguration had added 50¢/gal to current pump prices via USDollar Debasement. Geopolitical Fear Premium, also calculated by the Barrel Meter, adds another 80¢/gallon.

    http://www.trendlines.ca/free/peakoil/GasPump/GasPump.htm

  32. [...] energy prices was the disruption in the distribution mechanisms for energy supplies like oil (i.e. bottleneck in Cushing, OK). This has since been temporarily remedied, energy prices have collapsed, and the [...]