Disruption

Crude prices have fallen worldwide by about 20 percent since June 2014, as increasing supplies have not balanced with lackluster demand worldwide. Here in the U.S. prices for the benchmark West Texas Intermediate (WTI) grade have strengthened against international benchmark Brent as refiners continue to operate at high capacity. However, recent signs of discord in producer’s organization OPEC suggest they cannot agree to curb output – keeping downward pressure on overall prices. Today we wonder if there is a bottom to the current price slide.

Looking out over the next year and a half to 2016, Houston crude storage capacity looks to be lower than necessary to meet operational needs. With continuing increases in pipeline crude streams headed into the area in the next six months, we could see supply disruptions with consequences for price volatility. Probable victims of these disruptions would be producers looking to find a home at Houston refineries for their production. The solution is to build more storage but the market is not yet sending alarm signals to that effect.  Today we conclude our series on Houston storage capacity.