Underground Storage

The famous Field of Dreams misquote “If you build it, they will come” certainly has proved true for the midstream companies that added a record 18.7 MMbbl of crude oil storage capacity in PADD 2 in late 2015 and early 2016. During that six-month period, crude inventories in PADD 2 blasted 24.4 MMbbl higher to a record 155.6 MMbbl. And while PADD 2 oil stockpiles have been shrinking somewhat in recent weeks, they remain above 150 MMbbl—a mark the PADD had never seen before this year. Storage levels have been particularly high at the Cushing, OK storage and distribution hub within PADD 2. Why is so much crude being socked away?  Today, we continue our look at the new storage capacity being added in the U.S., and at why demand for storage has been so high.

More new crude oil storage capacity came online in the U.S. in the fourth quarter of 2015 and the first quarter of 2016 than in any half-year period in memory, and still more capacity is being planned. Even with all this new capacity—and the slowdown in crude oil production—the storage utilization rates at Midwest/Mid-continent and Gulf Coast tank farms, underground salt caverns and refineries are at or near record highs too. And tens of millions more barrels of storage capacity are on the drawing boards in anticipation of further incremental needs. But the energy sector is pulling back, right? What gives? Today, we begin an update on crude storage trends and crude storage facilities in Petroleum Administration for Defense Districts (PADDs) 2 and 3, which together account for 82% of U.S. crude storage capacity.

The biggest fundamental price indicator in the natural gas market -- Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report – is about to get a major makeover. The EIA is planning to split the US gas inventory data into five regions, from three macro regions currently. The idea has been floating out there for a while, but now it looks imminent, with a good chance it is rolled out before the gas winter season comes around in November. When it does happen, the increased granularity will vastly improve the transparency of natural gas storage inventory data on a weekly basis. But there’s another reason it will be a big deal when it happens:  It will break everybody’s storage scrapes and models. Storage modelers and forecasters will have their work cut out for them. In today’s blog, we break down the upcoming changes.

Sitting within or near the Marcellus/Utica shale gas play and facing tightening environmental rules that start kicking in next April, power generators in the PJM (a large region that includes the states of Pennsylvania, New Jersey, Maryland, Delaware, West Virginia and Ohio as well as parts of Virginia, North Carolina, Kentucky, Indiana, Illinois and Michigan) and New York electricity markets very likely will burn increasing amounts of natural gas the next few years. But with pressure to rebuild depleted gas inventories after this year’s Polar Vortex winter and the next wave of coal-unit retirements still months away, to what degree will generators in the region turn to gas this summer? In this episode in our gas power burn series, we provide a progress report on gas-inventory rebuilding and look at this summer’s coal-versus-gas dynamics in PJM and New York.