Natural gas storage breaks thru 900 Bcf
Yesterday the EIA reported that natural gas storage declined to 896 Bcf for the week ending March 21st. This is over 50% below both year ago levels and the trailing 5-year average. This is the lowest level for this time of year since March of 2003.
Then there is oil storage at Cushing, Oklahoma which is down 32% year-over-year.
Here is what the EIA had to say this week on what is unfolding at this important storage facility in the middle of the US.
Crude oil inventories at Cushing, Oklahoma, the primary crude oil storage location in the United States, decreased 13 million barrels (32%) over the past two months. On March 21, Cushing inventories were less than 29 million barrels, more than 20 million barrels lower than a year ago and the lowest level since early 2012. Cushing is the delivery location for the New York Mercantile Exchange (Nymex) West Texas Intermediate (WTI) crude oil futures contract.
The recent drawdown of stocks at Cushing resulted from three factors:
The startup of TransCanada’s Cushing Marketlink pipeline, which is now moving crude oil from Cushing to the U.S. Gulf Coast
Sustained high crude oil runs at refineries in Petroleum Administration for Defense Districts (PADD) 2 (Midwest) and 3 (Gulf Coast), which are partially supplied from Cushing
Expanded pipeline infrastructure and railroad shipments that have made it possible for crude oil to bypass Cushing storage and move directly to refining centers in PADDs 1 (East Coast), 3 (Gulf Coast), and 5 (West Coast)
The result of this has been a continued narrowing of the price difference between WTI ($101/b), Brent ($106/b) and LLS ($104/b). It is important to note that the global benchmark Brent has come down from around $110/b while the US domestic benchmarks of WTI and LLS have climbed up from sub $100/b levels at the end of last year. So as the logistic of moving US crude oil production improve the price of that domestic production has moved back into closer sync with the global market. This will be good news for US domestic producers and probably won’t change the situation for US consumers as much since they were already competing on the global market for refined products like diesel as this report has pointed out many times.