Crude Inventories Continue To Build: Puts Pressure On Cushing Storage

Oil inventories continued to build over the last two weeks and now sit at record levels. This has lead to fear among many industry watchers that the giant oil tanks in Cushing, OK may soon reach their maximum capacity. It is somewhat uncertain what will happen at that point. These inventory builds caused the price of West Texas Intermediate crude oil to continue to decline over the past two weeks.

At the end of the week ended March 13, 2015, the nation's inventories of commercial crude oil contained a total of 458.5 million barrels of crude oil. This is a fairly large increase of 9.6 million barrels compared to levels that these inventories contained at the end of the previous week. However, interestingly, the previous week saw a fairly small (comparatively) week-over-week increase of 4.5 million barrels. As already mentioned, the present level of 458.5 million barrels is the highest inventory level that has ever been seen in the United States for this time of year. Therefore, the current inventory level is substantially higher than last year's level of 375.9 million barrels.

Unlike oil inventories, the amount of motor gasoline in the nation's commercial inventories of that substance has been declining over the past two weeks. At the end of the week ended March 6, 2015, the nation's inventories contained a total of 239.9 million barrels of motor gasoline. This is a decline of approximately 200,000 barrels compared to the previous week's level. The nation's gasoline inventories fell even further during the following week. At the end of the week ended March 13, 2015, the nation's commercial inventories of motor gasoline contained a total of 235.4 million barrels, a decline of 4.5 million barrels compared to the previous week. Despite this persistent decline in inventories, the nation's inventories of motor gasoline still contain more gasoline than they did last year. At the end of the week ended March 14, 2014, the nation's inventories of motor gasoline contained a total of 222.3 million barrels of gasoline.

These declines in gasoline inventories came in spite of the fact that gasoline production has been rising. This seems to point to the conclusion that American consumers have been increasing their demand for gasoline. During the four-week period ended March 6, 2015, the nation's oil refineries produced an average of 8.717 million barrels of gasoline per day. This increased to an average of 8.830 million barrels per day during the four-week period ended March 13, 2015. This amount was significantly greater than what these same refineries produced during the corresponding period of last year. During the four-week period ended March 14, 2014, the nation's oil refineries produced an average of 8.602 million barrels of motor gasoline per day.

This increased gasoline production comes in spite of the fact that refinery utilization has been declining over the same time period. During the four-week period ended March 6, 2015, the nation's oil refineries processed an average of 15.275 million barrels of crude oil. This fell to an average of 15.273 million barrels of crude oil per day during the four-week period ended March 13, 2015. This is still higher than what these refineries processed during the same period of last year. During the four-week period ended March 14, 2014, the nation's oil refineries processed an average of 15.112 million barrels of crude oil per day.

Thus, it appears that the high production levels that the United States has been seeing in the past several weeks still continues to be well in excess of demand. This has resulted in further increases to the nation's inventories. If this trend continues, it seems likely that WTI crude prices will decline further.