Five days after TC Energy’s Keystone pipeline shut down following a 14,000-barrel spill into a Kansas creek, traders are questioning whether there is enough oil in storage in key locales if the pipeline remains shut for a number of weeks.
Here is the latest data on storage inventories, and other factors affecting cash prices in Canada and the United States:
WESTERN CANADIAN INVENTORIES
As of the week ending Dec. 2, Canadian inventories were just below 29 million barrels, according to energy consultancy Wood Mackenzie’s most recent data, with about 16 billion barrels of spare capacity available.
Following a previous Keystone leak in 2019, which triggered a 13-day shutdown, inventories climbed by 13.6 million barrels over five weeks. The spare capacity on hand this time suggests Canadian storage hubs have ample space for any barrels stranded in Alberta.
Canadian crude prices remain broadly steady. The discount on Western Canada Select (WCS) heavy blend crude fell to $33.50 a barrel below U.S. crude the day the leak was reported, before recovering. It currently trades at a discount of around $28 a barrel, only slightly wider than before the leak.
Wood Mackenzie will release Canadian inventory data for the week ending Dec. 9 later on Tuesday.
U.S. GULF INVENTORIES
Crude oil stocks at the Gulf Coast stood at about 226.5 million barrels, lowest in more than eight months, according to data from U.S. Energy Information Administration. Weekly Gulf Coast gross input into refineries stood at 9.4 million barrels per day. However, analysts were not worried about inventory.
“The Gulf Coast is reasonably well supplied. I don’t think that there is any sort of significant panic in terms of lack of heavy in the Gulf Coast, particularly given that we could pull more Colombian as well Latin American barrels into the Gulf,” said RBC Capital Markets analyst Michael Tran.
Prices of U.S. sour crude oil grades strengthened slightly on Monday, as refiners sought alternatives to Canadian barrels. Mars Sour WTC-MRS firmed 10 cents to a discount of $5.60 to U.S. crude futures, while West Texas Sour also strengthened 35 cents to a $1.15 discount.
CUSHING, OK STORAGE HUB
Inventories at the U.S. crude storage hub in Cushing, Oklahoma, totaled 28.3 million, according to Wood Mackenzie data for the week ending Dec 9. That puts inventories at about a third of capacity, and less than 4.5 million barrels above the operational floor, based on operational capacity and historical low utilization.
An ongoing shutdown would likely cause inventories at Cushing to drop. Numerous refineries in the Midwest usually pull barrels from the storage hub, but the price at Cushing has not moved much because traders expect part of Keystone to reopen soon.
The leak occurred just south of a key junction in Steele City, Nebraska, where Keystone splits into two legs. The leg that flows to Patoka, Illinois, could be reopened as it was not affected, said Wood Mackenzie analyst Dylan White.
So far TC has not commented on a partial restart of the Patoka leg.