Dylan White and Amanda Fairfax Dirkes, Oil Analysts
Crude stocks in St. James, LA, climbed 1.9mn bbls to a record high the week ending February 26, 2016 and could continue to increase if crude demand falls further at U.S. Midcontinent refineries that source crude from the U.S. Gulf Coast.
The week ending February 26, 2016, stocks in St. James were about 1.0mn bbls higher than the previous record-high set November 20, 2015, according to Genscape. A refined products glut in the Midcontinent has led to decreased refinery run rates there and in part caused tanks at St. James to fill. For example, Valero Energy cut production at the Memphis refinery in early February to combat relatively weak profits, according to market sources. Sources at the time estimated the refinery may decrease crude processing by 25 percent.
The St. James storage build week ending February 26, 2016 coincided with decreased outgoing crude pipeline volumes. Flow rates declined 88,000 bpd to 225,000 bpd on the Marathon-operated 1.2mn bpd St. James-to-Patoka, IL, Capline Pipeline, which feeds Valero’s Memphis refinery. The refinery consumes up to 195,000 bpd of light sweet crude from and outputs exclusively light products.
A Valero spokesperson declined to comment on refinery operations.
Capline weekly average flow rates for the week ending February 26, 2016 marked the lowest utilization since October 30, 2015, supporting decreased run rates at the Memphis refinery.
The storage build at St. James was also likely influenced by a weaker Louisiana Light Sweet differential. The return of a major seller to the Louisiana crude market caused the differential for Gulf Coast benchmark LLS to decrease slightly over the week ending February 26, 2016, as it was heard to trade at WTI plus $2.40/bbl last on February 28, 2016. The prior week, LLS was assessed at WTI plus $2.55/bbl.
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