Yahoo Finance Gulf Coast Crude Oil Inventory Hit New Highs, Drove Storage Costs
Watch Out! Inventory Data and China Could Swing Crude Oil Prices
Gulf Coast crude oil inventory
The current Gulf Coast crude oil inventory is at 252.9 MMbbls (million barrels) for the week ending January 29, 2016. It’s the highest level since 1990. The Gulf Coast’s working storage capacity is 302. 3 MMbbls. The inventory doesn’t account oil in pipelines or field storage. It’s also the largest among the US crude oil storage regions. To learn more, read EIA Crude Oil Inventory Breaks 34-Year Record Inventory High. In the third part of this series, we’ll discuss the consensus of the rising US crude oil inventory.
Why are Gulf Coast inventories rising?
LOOP crude oil storage futures, or the crude oil storage cost, hit $0.90 per barrel on February 9, 2016. It’s covered in the third part of the series. These contracts are based on the storage facilities in the Gulf Coast. The Gulf Coast receives oil from land and sea. Crude oil imports averaged around 3.18 MMbpd (million barrels a day) in the last ten weeks. It’s the highest since July 2015. The record stockpile at Cushing, Oklahoma, also drove crude oil to Texas and Louisiana.
The long-term crude oil storage costs are ~$0.65 per barrel in the Gulf Coast. The costs are ~$0.35 per barrel in Cushing, Oklahoma, according to Macquarie Capital sources. CME also increased the margin for the LOOP crude oil storage futures contract to $440 from $385 on Thursday, February 4, 2016.
The rising storage cost limits the profitability of oil producers’ strategy of taking advantage of the wider contango market. Market surveys suggest that flat US crude oil production, rising crude oil imports, and the mild winter will continue to put pressure on US crude oil storage facilities. As a result, it will benefit LOOP crude oil storage contracts and oil tankers like Teekay Tankers (TNK), Frontline (FRO), DHT Holdings (DHT), and Tsakos Energy Navigation (TNP). However, lower oil prices benefit refiners like Western Refining (WNR), Alon USA Partners (ALDW), and Northern Tier Energy (NTI).
The volatility in the oil market benefits ETFs and ETNs like the United States Oil Fund (USO), the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).
In the next part of this series, we’ll discuss the U.S. Commodity Futures Trading Commission’s report.
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