U.S. oil inventories at levels not seen in at least 80 years
North American oil prices could take a hit this fall as there are renewed concerns about a lack of storage capacity.
A recent report by the U.S. Energy Information Agency suggests crude oil inventories “remain near levels not seen for this time of year in at least the last 80 years.”
The concern is what will happen this fall and whether oil supplies will hit “tank top.” North American refineries are running at near capacity this summer, buying up oil and converting it to gasoline and other products. Several refineries will shut down in a few months for maintenance and there could be more unplanned outages because refineries are operating at such a high level.
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Each fall, it’s typical for inventories to begin to build, but “the problem is we are at a much higher starting point,” said Jackie Forrest, a vice-president with ARC Financial, who monitors trends in the Canadian oil and gas industry. A lack of storage could impact North American oil prices and in particular West Texas Intermediate (WTI), the benchmark for the continent.
“It could cause a bit of a disconnect where WTI becomes a bit cheaper than global crudes, but I don’t think it is going to cause a serious problem where there is no room to store crude,” said Forrest.
Canadian oil production is expected to rise over the next few decades.
The oilpatch had similar concerns in the spring. At that time, some companies began turning to ‘fracklog’ as one method of storing oil. Producers continue to drill wells, but stop just short of pumping out the oil. It’s a way of storing the oil in the ground. The goal is to hold on to the oil until prices rebound.
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