Wednesday, January 6, 2016

Cushing inventories start 2016 at all-time high

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Favourable storage economics continue to pay dividends to the tank terminal industry as Cushing inventories reached a new all-time high.

Genscape recorded that for the week ending January 1, 2016, crude inventories at the North American hub surpassed the previous all-time high reached in April 14, 2015 by almost 347,000 barrels.

The widening 12-month price contango structure for West Texas Intermediate has been in part attributed to the surge. Additionally, year-end tax reduction strategies added an incentive to move crude into storage tanks at the hub.

Utilisation is however 2% below the all-time high set in March 2011.

A total of seven operators based there are above 80% capacity utilization, which suggests that most of their storage volumes are likely merchant, or leased to others, rather than operational.

These operators, which have a combined operational capacity of 31.184 million barrels, have only 4.745 million barrels of available capacity.

Genscape notes that three different companies are also expanding their storage assets, with 1.93 million barrels of capacity under construction. These projects are expected to be online by the end of the first quarter of 2016.

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