The EIA discusses oil inventories in This Week in Petroleum (https://www.eia.gov/petroleum/weekly/):
“Using inventory levels from the latest Weekly Petroleum Status Report, utilization in PADD 3 and at Cushing was 84% and 89%, respectively. Since the end of September, however, it is likely that new storage capacity has been built, which would reduce overall utilization. Weekly crude oil inventory numbers also include pipeline fill and lease stocks (oil that has been produced but not yet entered into the supply chain), which are not included in the capacity survey estimates.”
And, comparing today’s situation with 2008:
“There are a few differences in the crude oil market now compared with 2008 and 2009 that may explain why contango is not as great and floating storage is not as prominent. Since 2011, onshore storage capacity has grown on both an absolute basis and compared with refinery runs, likely mitigating some of the increase in storage costs. The switch in the global crude oil market from inventory draws to inventory builds was much larger in 2008 compared with 2014. From the first quarter to the fourth quarter in 2008, global stocks went from a draw of 1.38 million barrels per day (b/d) to a build of 2.38 million b/d, or a net change of 3.76 million b/d. In 2014, the net change was only 1.36 million b/d.”
Here is the takeaway:
“However, with inventories already high after generally building over the past 18 months, this turnaround season could push storage capacity use to new highs”
This is why we see -$5 puts trading on the April/May spread. And, price rallies should be difficult to maintain while in an inventory building cycle.
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