America’s largest oil hub in Cushing, Oklahoma, is growing even as producers and traders look to move surging West Texas production to the coast for export.
The U.S. petroleum industry is planning to build about 4.8 million barrels of storage capacity and as many as seven new pipelines to move oil to and from the hub. The growth is a reminder of Cushing’s significance as a key trading hub for U.S. and Canadian crudes despite booming exports, according to speakers at last week’s Crude Oil Quality Association meeting in Oklahoma City.
Companies are building up Cushing, the delivery point for West Texas Intermediate futures, even as pricing in Houston is growing in importance for overseas markets. U.S crude exports reached 3.6 million barrels of crude per day during the week ended February 15, the highest since Washington ended restrictions in late 2015.
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Six pipeline projects have been planned to move about 2 million barrels a day of crude away from Cushing by the end of 2021, but it’s unlikely they’ll all get built, according to Hillary Stevenson, Genscape Inc’s director of oil market business development. A more conservative estimate would be close to 750,000 barrels a day of new outgoing capacity, she said.
Cushing Exit Pipes Projects Project Type Destination Target Capacity in b/d Gladiator New Houston, Texas 3Q 2020 300k Diamond Expansion Memphis, Tenn./Capline 3Q 2020 200k Voyager New Houston, Texas 4Q 2020 250k Red Oak New Corpus Christi, Houston & Beaumont in Texas 4Q 2020 400k Seahorse New St. James & Plaquemine, Louisiana 3Q 2020 800k Marketlink Expansion Houston & Beaumont, Texas TBD TBD Red River Expansion Longview, Texas TBD 85kSource: Genscape, Bloomberg, Companies
The majority of the new storage is from Keyera Energy Corp’s proposed 4.5 million-barrel Wildhorse terminal that is set to be complete by the middle of next year. Magellan Midstream Partners LP and Plains All American Pipeline LP will also add new storage, Stevenson added.
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The U.S. government currently estimates working storage capacity at Cushing at nearly 77 million barrels.
Tallgrass Energy LP could build up to 5.5 million barrels of storage at a new Cushing terminal but it may depend on its Seahorse crude pipeline project, Genscape’s Stevenson said in an email. TC Energy Corp and Magellan both have additional tanks permitted in Cushing, but it’s unclear if and when these tanks, which amount to about 2 million barrels in total, would be added. Plains All American also has the ability to add tanks, she added.
Trading volume in Cushing has increased 10% year-on-year with so much happening in the market as well as new output, flooding and outages, said Dan Brusstar, CME Group director of energy research. “We may see storage growing to 100 million barrels soon.”