Gulf Coast crude inventories have risen by 15 million barrels in the past five weeks and are about three million barrels below the record level set in April.Daniel Acker/Bloomberg
The Gulf is up to its gills in crude.
Storage tanks from Texas to Alabama are filling up on oil from Canada, the Midwest and the Middle East, pushing down prices for crude produced in the Gulf of Mexico just as output has risen to the highest level since after the BP PLC oil spill.
"The Gulf Coast is seeing an onslaught of crude coming down from the mid-continent and the continued imports of high-sulfur crudes," Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone Wednesday. "Medium-sour and heavy-sour crudes are coming under increasing price pressure."
Oil output in the Gulf of Mexico rose to 1.58 million barrels a day in July, the highest level since September, 2010. New production is coming from Royal Dutch Shell PLC's Olympus platform and Anadarko Petroleum Corp.'s Lucius platform as companies bear the fruits of projects that have been in development for years.
Gulf Coast crude inventories have risen by 15 million barrels in the past five weeks and are about three million barrels below the record level set in April. They're rising at the same time that supplies in the Midwest are falling as pipelines between the region pump more crude.
Southbound pipelines such as the Seaway legacy line, Seaway Twin and TransCanada Gulf Coast saw September flows rise by 244,000 barrels a day from the month before, said Hillary Stevenson, a Louisville, Ky.-based analyst for Genscape Inc.
Pipeline flows are increasing amid the heaviest refinery turnaround season in the Midwest in at least five years, with about 21 per cent of capacity offline last week, according to the U.S. Energy Information Administration. Flint Hills Resources LLC, BP and Marathon Petroleum Corp. are among refining companies performing planned maintenance on plants in the region.
"That certainly explains the flows to the Gulf," John Auers, executive vice-president at Turner Mason & Co., an energy consulting firm in Dallas, said by phone. "The excess crude has to flow to where the refining capacity is."