A slew of crude imports from Iraq, Angola and other countries has storage tanks in the eastern U.S. Gulf of Mexico bulging, pressuring physical prices, causing port congestion and delaying deliveries into Louisiana, traders say.
Reuters reports that with arrivals into the world’s biggest energy market this month set to top April levels, traders expect the strain on U.S. infrastructure could move inland, further swelling inventories already at record highs.
The glut of domestic crude has kept growing even as futures prices rallied nearly 20% in April. Market watchers say the issue in Louisiana could dampen prices ahead. Shipments have already boosted stockpiles in Louisiana, home to some of the largest U.S. refineries like Marathon Petroleum Corp.’s 522,000 barrel per day Garyville refinery and Exxon Mobil Corp.’s 502,500-bpd Baton Rouge refinery.
Tanks in the St. James region have as much as 22 million barrels, just 700,000 barrels shy of its record in March, according to Genscape. That is equivalent to around 70% of capacity and up from 57%, or 17 million barrels, a year ago.
Two shipping sources familiar with operations say the shortage of tank space is causing delays of up to two weeks in offloading crude in Louisiana, including into the Louisiana Offshore Oil Port (LOOP), the largest privately owned crude storage terminal in the United States.
A LOOP spokesman did not address the timing but called vessel traffic “high” and says the port was trying to offload vessels as “expeditiously as practical” while working closely with shippers on logistics schedules.
“Inventories are still sky high, and it hasn’t just evaporated,” says Sandy Fielden, an analyst at RBN Energy. “There are still a lot of issues trying to find storage space even just for operational reasons.”
Storage limits at the U.S. hub of Cushing, Oklahoma, were tested earlier this year. The glut fed worries about supply imbalances as a sell-off pushed oil to 12-year lows.
Physical crude grades are “losing steam quickly”, says one crude trader. Read the full story.
