USA Gulf Coast Oil Supply Pile Up Only Temporary

Oil & Gas

Crude inventories are swelling on the U.S. Gulf Coast, but the pile-up won’t last for very long.  

Supplies have surged by nearly 20 million barrels so far in October, the most for this month in at least a decade, on the reversal of Capline pipeline and as more barrels are pulled to the region for export due to demand from Asia. But refiners are beginning to ramp up operations after maintenance and that should lead to stockpile declines. 

“It seems a temporary bottleneck due to seasonal maintenance” at refineries, said Matt Smith, lead oil analyst for the Americas at Kpler. Plus, storage owners will also be incentivized to draw down inventories over the next month or so, with year-end tax implications looming in December, he said. 

In contrast to the supply situation along the Gulf Coast, stockpiles at Cushing, Oklahoma, the delivery point for West Texas Intermediate crude futures, have slumped to the lowest since October 2018. The difference in the two regions highlights how the U.S. crude benchmark does not fully reflect supply and demand in the Gulf Coast.    

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