Cushing Oklahoma Oil Glut
Oil Supplies Rise in Survey on Cushing Pipeline: Energy Markets
By Mark Shenk
U.S. crude stockpiles rose for a fifth week as TransCanada Corp. completed an extension of a pipeline to Cushing, Oklahoma, adding to a glut at the country’s biggest oil-trading hub, a Bloomberg News survey showed.
Inventories climbed 2 million barrels, or 0.6 percent, in the seven days ended Feb. 11 from 345.1 million a week earlier, according to the median of 13 analyst estimates before an Energy Department report tomorrow. Twelve of the respondents forecast an increase and one projected a decline.
Stockpiles at Cushing, the delivery point for New York- traded West Texas Intermediate, rose in the week ended Jan. 28 to the highest level since at least 2004, according to the Energy Department. TransCanada started deliveries to the hub on Feb. 8 in the second phase of its Keystone pipeline project.
“We’re going to see inventories rise, especially at Cushing,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “The Keystone pipeline opened a new extension to Cushing, which is already near record levels.”
The first phase of the $12 billion project, from Hardisty, Alberta, to Wood River and Patoka, Illinois, started service in mid-2010. The link is operating at about 450,000 barrels a day, Paul Miller, senior vice president for oil pipelines at Calgary- based TransCanada, said Feb. 8.
An expansion to the Gulf Coast, the third phase of the project, known as Keystone XL, may be operational by early 2013 if regulators approve it. The XL extension will run from Cushing to Nederland, Texas, linking Gulf refineries to Canada’s oil sands.
Cushing stockpiles climbed in 10 of the past 13 weekly reports from the Energy Department and peaked at 38.3 million barrels in the last week of January.
“The problem with Cushing isn’t going away anytime soon,” Larry said. “The plans to build links to the Gulf are all well and good, but rarely are these projects finished by the projected end date. The problem is being dealt with by increasing storage capacity at Cushing.”
Terminal operators including Plains All American Pipeline LP, The Gavilon Group LLC and Magellan Midstream Partners LP have announced plans to build 14 million barrels of oil storage at Cushing by the end of 2011. That would boost capacity as much as 25 percent at the hub from the existing 55 million barrels.
Crude oil for March delivery declined 49 cents, or 0.6 percent, to $84.32 a barrel on the New York Mercantile Exchange, the lowest settlement price since Nov. 30. April futures slipped $1.16, or 1.3 percent, to $87.57, the ninth straight decline.
Cushing supplies have depressed WTI prices in relation to Brent oil in London. Brent for April settlement declined $1.44, or 1.4 percent, to $101.64 a barrel on the London-based ICE Futures Europe exchange. Yesterday, it touched $104.30, the highest intraday price since Sept. 25, 2008.
The premium of April Brent to New York futures for the same month was $14.07 a barrel today, according to data compiled by Bloomberg News. The gap averaged 76 cents last year.
During the past decade North Sea barrels were imported into the U.S. because oil was costlier in New York.
Crude-oil imports slipped 1.2 percent to 8.91 million barrels a day in the week ended Feb. 4, according to the Energy Department. The U.S. imported an average 1.96 million barrels a day from Canada in the first 11 months of last year, the most from any country, department figures show.
“We’re overstocked with oil,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We’re in the midst of a seasonal uptrend in crude-oil stocks that typically doesn’t end until May.”
Nationwide crude-oil stockpiles climbed 11.9 million barrels in the four weeks ended Feb. 4, the biggest gain for that length of time since March, department figures showed. Supplies rose in the first quarter during the past 14 years.
Refineries probably operated at 84.7 percent of capacity, according to the Bloomberg News survey. That was unchanged from the prior week. Utilization rates slipped in three of the previous five weeks.
“Stockpiles should also rise because of low refinery run rates,” Kilduff said.
Gasoline stockpiles increased 1.85 million barrels, or 0.8 percent, from 240.9 million, the survey showed. Supplies climbed in all but one of the past 12 reports and surged to the highest level since March 1990, in the week ended Feb. 4. Fourteen respondents gave product-supply estimates. Thirteen respondents projected a gain and one said there was a drop.
“We will probably end up with a large surplus when gasoline demand picks up this summer,” Evans said. “This should remove any justification for price increases in the months ahead.”
Supplies of distillate fuel, a category that includes heating oil and diesel, probably slipped 400,000 barrels, or 0.2 percent, from 164.4 million, the survey showed. Ten of the analysts anticipated a decline, three projected an increase and one said there was no change.
The department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington.
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