Oil glut's latest dilemma: where to store it all
Mar 5 2015, 19:23 ET | By:
Carl Surran, SA News Editor
U.S. inventories are at their
highest levels in at least 80 years, and the U.S. is running out of places to store it, prompting some analysts to predict already depressed prices
could spiral even lower.
When storage is full, there is pressure on those holding oil in storage to "dump that inventory,” says the CEO of energy consulting firm Perry Management, who believes the space shortage could cause prices to
drop to as low as $30/bbl.
U.S. oil production rose for the fourth consecutive week to a rate of 9.3M bbl/day, even as drilling rigs are being idled at a rapid clip; U.S. inventories also rose, for the eighth straight week, jumping 2.4% to 444M barrels, the U.S. Energy Information Administration
reports.
Producers are pumping nearly 1.5M bbl/day more crude than the world needs, due to a combination of slowing demand and rising production in the U.S., meaning oil put in storage today could be there for years; should the glut worsen, more producers could be forced to shut their wells, effectively storing the oil in the ground.
Storage operators at Cushing, Okla., including Plains All American (NYSE:
PAA) and Phillips 66 (NYSE:
PSX), said recently they expect the tanks there to hit capacity - currently they are about two-thirds full.
