US crude oil stocks have grown over 30 million barrels each month this year, leading to a series of record highs and most recently reaching 471 million barrels of crude on March 27, 2015. Even so, Wood Mackenzie's latest outlook estimates that the US has about 200 million barrels of unused crude storage capacity. Afolabi Ogunnaike, Senior Research Analyst for Americas Refining and Oil Product Markets at Wood Mackenzie explains: "Wood Mackenzie does not expect the US to run out of crude storage. On the contrary, we anticipate that the uptick in refinery crude runs and exports will exceed the growth in supply eventually leading to stock withdrawals." Wood Mackenzie forecasts refinery crude runs will rise significantly in April as refineries exit seasonal maintenance and gear up for the summer driving season. "Refinery crude runs could increase over 1.7 million barrels per day (b/d) from the spring lows to the summer high and set new records. The ramp up in crude runs is expected to be the largest factor impacting the trajectory of US crude stocks. As US refineries increase their throughputs, we anticipate they will also increase their imports of crude oil from the March 2015 levels," says Ogunnaike. The low crude oil prices have contributed to slower growth of US crude oil supply. Wood Mackenzie expects this growth will be counterbalanced by increasing exports of crude oil and minimally processed condensate. These exports are supported by a wider Brent-WTI differential. Although the US has ample crude storage capacity available, Cushing is now about 80% full, according to Wood Mackenzie: "The April 2015 start up of the 250,000 b/d Cactus pipeline from the Permian into the Gulf Coast is expected to reduce pressure on Cushing. This pipeline bypasses Cushing, and moves light crude to the Gulf Coast refining and storage hub. Rising Cushing crude stocks could also reach the Gulf Coast by accessing the 1.55 million b/d pipelines connecting the two regions," Ogunnaike adds. US crude storage capacity has grown significantly as tight oil supply and takeaway capacity increased. "As storage hubs like Cushing approach capacity, crude may need to be transported further to access available storage sites. These sites could charge higher fees and may be more costly to reach. This logistics factor has a widening impact on Brent-WTI. We anticipate the narrowing impact of the rising crude runs, however, outweighs some of these challenges and compresses the Brent-WTI differential this summer," notes Ogunnaike. Wood Mackenzie's outlook reiterates that despite the rise in crude oil stocks this year, US storage is not close to reaching capacity. "Record high crude stocks will be pulled down this summer as US refinery crude runs rise over 1.5 million barrels per day," concludes Ogunnaike.
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