Crude oil storage

Cushing has done it again! The all-important hub in central Oklahoma is once more broadening the range of crude oils it handles, this time by figuring out how to receive and blend the quirkiest of domestic oils: yellow wax crude from Utah’s Uinta Basin. Better still, the blending can create a fully compliant Domestic Sweet (DSW), the crude quality deliverable on the CME/NYMEX futures contract usually referenced as West Texas Intermediate (WTI). In today’s RBN blog, we discuss how it works and what it means for Uinta producers, waxy crude marketers, refiners and Cushing itself. 

The world is in desperate need of more crude oil right now and anybody with barrels is scouring every nook and cranny for any additional volume that can be brought to market. Some of that may come from increased production, but the oil patch is a long-cycle industry, just coming off one of the most severe bust periods ever, and it will take time to get all the various national oil companies, majors, and independents rowing in the same direction again. For now, part of the answer will be to drain what we can from storage — after all, a major purpose of storing crude inventories is to serve as a shock absorber for short-term market disruptions. To that end, the U.S. is coordinating with other nations to release strategic reserve volumes to help stymie the global impact of avoiding Russian commodities. Outside of reserves held for strategic purposes though, commercial inventories have already been dwindling as escalating global crude prices have been signaling the market to sell as much as possible. Stored volumes at Cushing — the U.S.’s largest commercial tank farm and home to the pricing benchmark WTI — have been freefalling for months, which raises the question, how much more (if any) can come out of Cushing? In today’s RBN blog, we update one of our Greatest Hits blogs to calculate how much crude oil is actually available at Cushing.

Russia’s war on Ukraine turbocharged global crude oil prices and spurred price volatility the likes of which we haven’t seen since COVID hit two years ago. The price of WTI at the Cushing hub in Oklahoma — the delivery point for CME/NYMEX futures contracts — has gone nuts, and the forward curve is indicating the steepest backwardation ever. In other words, the market is telling traders in all-caps, “SELL, SELL, SELL! Sell any crude you can get your hands on. It’s going to be worth far less in the future.” So anyone with barrels in storage there for non-operational reasons is pulling them out, and fast! In today’s RBN blog, we look at the recent spike in global crude oil prices and what it means for inventories at the U.S.’s most liquid oil hub.

The seven years since the heady days of $100/bbl oil in mid-2014 have been a tumultuous time for midstream companies tasked with funding a massive infrastructure build-out to support surging crude oil and natural gas production. Midstreamers have been buffeted by volatile commodity prices, waves of E&P bankruptcies, rapidly shifting investor sentiment, and, finally, a global pandemic. Perhaps no company has had a more challenging road than master limited partnership (MLP) Plains All American, which had to cut unitholder distributions three times over a turbulent five years as it built out a crude gathering and long-haul transportation portfolio focused on the Permian Basin. With its capital program winding down, commodity prices rising, and a new joint venture in the works, can Plains performance rebound and win back investor support? In today’s blog, we discuss highlights from our new Spotlight report on Plains, which lays out how the company arrived at this juncture and how well-positioned it is to benefit from the significant recovery in commodity prices and Permian E&P activity.

The seven years since the heady days of $100/bbl oil in mid-2014 have been a tumultuous time for midstream companies tasked with funding a massive infrastructure build-out to support surging crude oil and natural gas production. Midstreamers have been buffeted by volatile commodity prices, waves of E&P bankruptcies, rapidly shifting investor sentiment, and, finally, a global pandemic. Perhaps no company has had a more challenging road than master limited partnership (MLP) Plains All American, which had to cut unitholder distributions three times over a turbulent five years as it built out a crude gathering and long-haul transportation portfolio focused on the Permian Basin. With its capital program winding down, commodity prices rising, and a new joint venture in the works, can Plains performance rebound and win back investor support? In today’s blog, we discuss highlights from our new Spotlight report on Plains, which lays out how the company arrived at this juncture and how well-positioned it is to benefit from the significant recovery in commodity prices and Permian E&P activity.

Plains All American has an extraordinary collection of crude oil gathering systems and shuttle pipelines in the Permian Basin, as well as full or partial ownership interest in a number of long-haul takeaway pipelines to the Gulf Coast and the Cushing hub. As important as many of these individual systems and pipelines may be, it’s the interconnectivity among these assets — and especially Plains’ crude oil terminals in Midland and other West Texas locales — that gives the midstream giant’s Permian infrastructure a value far greater than the sum of its parts. Today, we’ll discuss the important role that Plains’ two terminals in Crane, TX, play in balancing the midstream company’s Permian crude oil delivery network and providing destination optionality.

Every day, another 4.5 million barrels of Permian crude oil begin the journey from wells in West Texas and southeastern New Mexico to refineries in the U.S. and abroad. For most of that oil, it’s no simple trek. Not only does it wend its way through gathering systems and shuttle pipelines to nearby hubs, it often needs to be directed between terminals within those hubs to reach the specific outbound, long-haul pipe that will take it to where it needs to go. We get it — you probably don’t need to know about every nook and cranny in the multi-terminal hubs at Midland, Crane, Wink, and elsewhere in the Permian, but it sure would help to understand generally how the flow of oil to market works, and why a terminal’s ability to provide destination flexibility is so crucial. Today, we continue our series on Permian hubs and terminals with a real-world example of how a barrel of Delaware Basin crude oil moves to Corpus Christi, Houston, or Cushing.

It is impossible to overstate the significance of the crude oil hub in Patoka, IL, to refineries in the Midwest. The seven-terminal hub, whose 80-plus above-ground tanks can hold more than 17 million barrels of crude oil, serves as the primary storage, blending, and staging site for a dozen refineries in five states with a combined capacity of more than 2.6 MMb/d. In other words, if the folks that keep Patoka running decide to take a couple of days off, Midwest refining would pretty much grind to a halt. And that’s not all: the southern Illinois hub also plays a critical role in sending crude oil south to the Gulf Coast. Today, we conclude our series on the Patoka hub with a look at the infrastructure within the facility’s boundaries and the pipes that transport oil out of it.

Midland may be the king of crude oil hubs in the Permian, with its immense storage capacity and robust trading activity, but the hub in Crane, TX, is at least a prince — and a particularly interesting one at that. In addition to its 7 MMbbl of tankage for storing, staging, and blending crude (and another 1 MMbbl on the way), Crane offers a slew of inbound pipelines from both the Delaware and Midland basin, plus links to and from the Midland hub and a number of outbound pipelines to both the Corpus Christi and Houston markets. Just as important to know about, are the various intra-hub connections among Crane’s 10 terminals, because they reveal how you can get crude to pretty much wherever you need it to be. Today, we continue a series on crude storage in West Texas and southeastern New Mexico.

The steady growth in Permian crude oil production that everyone was banking on just a couple of years ago didn’t happen as planned. When COVID intervened, Permian oil output sagged and then stabilized at just over 4 MMb/d until last month’s Deep Freeze, when production plummeted and then quickly rebounded. Still, in anticipation of increasing output from the Permian, new takeaway-pipeline capacity from West Texas to the Gulf Coast was built out over 2016-20, as was new crude storage capacity at hubs in the Delaware and Midland basins to support the operation of the new lines. So, with all that construction, the Permian must be sittin’ pretty from a midstream infrastructure perspective, right? Don’t be too sure. From a big-picture perspective, the region has more than enough takeaway capacity, but there are strong indicators — and recent evidence — that in-region storage capacity hasn’t kept pace to be able to handle any hiccups (and worse) that can occasionally rattle the oil patch. Or maybe it’s just that folks don’t fully understand where the Permian’s storage capacity is, how it’s interconnected, and how it’s used. Today, we begin a blog series on crude storage in West Texas and southeastern New Mexico.