This week, we're sharing data and insights related to the building inventories we're seeing in PADD 3 and Midland basin, and also potential relief for export and production backup issues.
PADD 3 Inventory Coverage
Ursa records weekly measurements of crude oil storage in PADD 3, as well as many other places around the world. North America coverage includes Houston, Texas City, New Orleans, Midland Basin, Baytown, LOOP, and many others, a significant portion of PADD 3 total crude oil inventories. PADD 3 is a major destination of crude oil and its ports export this crude all over the world. It produces so much crude oil that it has a grand influence on the global oil market.
EIA Crude Oil Inventory Correlation
The chart on the left represents the correlation between EIA PADD 3 inventory weekly data and Ursa’s PADD 3 weekly data. As you can see, Ursa’s data has a very strong correlation with the government organization. The EIA is a greatly trusted and reliable source for crude oil data; however, this data is aggregated on a full PADD basis, not allowing users to differentiate between key ports. With a 0.96 correlation to data gathered by EIA, Ursa can filter out specific areas of interest to the analysis, ahead of EIA reporting.
Exporting Hold Ups
Crude oil production in the Unites States has been steadily rising for the last several years. The United States has now surpassed Russia and Saudi Arabia as the world’s largest crude oil producer. The United States also has one of the highest demands for crude oil, but also is now exporting a considerable amount of crude. This high demand and flow of crude oil has increased the need for oil ports along the coast in PADD 3. Sites along the gulf coast were originally created to receive oil to fuel the demand of the United States. Now that the US has increased its production rate, it has begun to export crude at a higher rate than ever before.
The ports previously built for importing crude are now being utilized to export crude across the globe. A recent article posted by Reuters titled “China Snaps up US Oil, Straining Capacity to Export It” talks about production build concerns. The concerns are due to the United States out producing the amount that they are exporting. This is causing backup in major pipelines that flow down to ports like Corpus Christi, Meraux, and Port Arthur. Crude inventory level in these exporting sites has been on the rise over the past few months. With nowhere for the oil to go, pipelines are starting to get backed up which in turn is backing up tank farms and other inventory sites like Midland.
Inventory Changes in PADD 3
Ursa has measured large changes in crude oil inventory levels across multiple sites in PADD 3, including key export hubs and the Midland inventory terminal. We are noticing several weeks of continuous build throughout late March and April, until inventories begin to fall, demonstrating initial potential relief of the export and production backup issues.
Specifically, Ursa has measured similar trends in production driven storage. On the right is a graph of the total fill percentage of the Midland oil storage facility. We are noticing several weeks of continuous build until early May. This correlates with the Reuters article, visualizing the build-up of
crude and its inability to move from storage facility through pipeline to export hub. The tail end of the chart where we are noticing recent declines in inventory level could resemble the movement of the crude from facility into pipeline.
The second graph demonstrates the total fill percentage for major PADD 3 exporting facilities. This includes data from Baton Rouge, Corpus Christi, Meraux, and Port Arthur. Again, we are noticing drastic builds which could correlate with the article.
Since the ports were not originally made for exporting and the United States production rates are much higher than the export rate and consumption rate together, it makes sense that the export hubs are seeing steady increases in inventory levels. However, the good news is that the last few weeks have seen decreases in inventory, much like the above graph but at a delay. This could be showing a correction in the exporting backlog issues stated in the Reuters article or a minor decrease in United States production in response to the lack of export productivity.
Ursa tracks these sites weekly and will be keeping a close eye on the movement of oil in this region to track how this situation plays out, especially as new pipeline capacity is built in West Texas.