Storage Capacity Limits and Strategic Petroleum Reserve

April 1, 2020April 9th, 2020
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Oil storage is playing a larger role recently. Global oil supply is likely rising due to OPEC increases. Demand is falling due to the new coronavirus. Excess supply will need to go into storage, but storage has limits.

Oil storage is playing a larger role recently. Global oil supply is likely rising due to OPEC increases. Demand is falling due to the new coronavirus. Excess supply will need to go into storage, but storage has limits.

Oil storage is playing a larger role recently. Global oil supply is likely rising due to OPEC increases. Demand is falling due to the new coronavirus. Excess supply will need to go into storage, but storage has limits. 
The U.S. is not immune from global supply increases. More supply likely means more foreign barrels arrive on the Gulf Coast, and U.S. oil exports could fall as there are more barrels competing for market share abroad. 
Storage is the balancer in such a situation. For example, if supply and demand were somewhat balanced before the recent events, then a global increase in supply by 2 MMBbl/d and a global drop in demand of 2 MMBbl/d would imply an extra 4 MMBbl/d would need to go into storage. 
In the U.S., that balancing item is likely much lower. Still, if exports were to fall by 1 MMBbl/d (we currently export around 4 MMBbl/d) and demand falls by 1 MMBbl/d (normal is about 17 MMBbl/d), then that’s 2 MMBbl/d of crude oil that needs to go into storage. This assumes production and imports are unchanged.

Oil storage is playing a larger role recently. Global oil supply is likely rising due to OPEC increases. Demand is falling due to the new coronavirus. Excess supply will need to go into storage, but storage has limits. 
The U.S. is not immune from global supply increases. More supply likely means more foreign barrels arrive on the Gulf Coast, and U.S. oil exports could fall as there are more barrels competing for market share abroad. 
Storage is the balancer in such a situation. For example, if supply and demand were somewhat balanced before the recent events, then a global increase in supply by 2 MMBbl/d and a global drop in demand of 2 MMBbl/d would imply an extra 4 MMBbl/d would need to go into storage. 
In the U.S., that balancing item is likely much lower. Still, if exports were to fall by 1 MMBbl/d (we currently export around 4 MMBbl/d) and demand falls by 1 MMBbl/d (normal is about 17 MMBbl/d), then that’s 2 MMBbl/d of crude oil that needs to go into storage. This assumes production and imports are unchanged.

Standard close. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact info@aegis-energy.com

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