Oil glut up close: How Cushing copes with full crude tanks

Tue Apr 5, 2016 11:56am EDT
 
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By Jessica Resnick-Ault

CUSHING, OK (Reuters) - From the air above this small Oklahoma town, the 300 steel oil storage tanks that dot the landscape appear filled to the brim, their floating lids bobbing atop more than 65 millions of barrels of oil.

There may be no better place to witness what a world awash in crude looks like, and the 9 square-mile (23.3 square km)complex seems to bear out oil traders' fears that the industry is running out of space to contain a historic supply glut that has hammered prices.

Such worries make weekly estimates of Cushing stockpiles from the Energy Information Administration one of the hottest market indicators. These inventories peaked in mid-March and have edged lower since then. Some traders reckon they are unlikely to exceed those records for years as refiners rumble back from seasonal maintenance and demand rises. Others warn the stockpile could rise again.

Up close, from a 24-hour bunker that controls a quarter of tank space here, the ‘pipeline crossroads of the world’, reveals its secret - there is some spare room left.

On March 24, the day after U.S. government data showed Cushing’s tanks held a near-record 66.23 million barrels of crude, Mike Moeller, manager at Enbridge, explained how the largest Cushing operator uses every last inch of usable space.

Operators and technicians make it possible by moving a half-million barrels per day in internal pipelines that link the major pipelines and tanks of its 20 million barrel terminal.

Enbridge's capacity has risen about a third over the past five years, but the volume of oil coursing through the jungle of pipes, valves and tanks that connects suppliers from as far away as Alberta’s oil sands to the Gulf of Mexico refiners has quadrupled.

“We are fuller than we have ever been,” Moeller told Reuters. Customers tell Enbridge every month how much crude is coming, but Moeller and his team leave some space at the top of each tank that might be needed in an emergency.   Continued...

 
A sign built out of a pipeline that reads "pipeline crossroads of the world" welcomes visitors to town in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford