The Oil Market Is Even Tighter Than The Positive Data Suggests

The Oil Market Is Even Tighter Than The Positive Data Suggests

Share to Linkedin Oil inventory statistics increasingly suggest a tight oil market, but one nuance related to how oil in infrastructure is stored and reported could mean that the market is much tighter than currently estimated. From March 2011 to December 2021, over 100 crude oil pipelines were completed as U. S. midstreamers undertook massive multi-year infrastructure projects on the premise of continued production growth. In lockstep with the build-out, crude oil stored in pipelines (known as line fill) grew by ~54 million barrels, up from ~75 million to ~ 129 million, and today accounting for ~ 30% of U. S. commercial crude oil stocks Figure 1. Unfortunately, declining oil prices in 2020, as well as in some years prior, caused producers to lower U. S. crude production; most of the infrastructure built to receive growing production now sits underutilized. Figure 1: Pipeline Fill since 2011 Source: EIA, Working and Net Available Shell Storage Capacity Report With soaring crude prices, falling stock levels, and lower overall domestic production, oil bulls are increasingly scrutinizing the availability of America's commercial crude oil stockpiles, that include this number. The idea is simple – during the boom times, the U. S. overbuilt midstream infrastructure.