There continues to be a misunderstanding about the US’s capacity to store oil.
With demand slowing but supply surging, some folks have worried that an inability to store extra oil could mean a variety of things including crashing oil prices or an explosion in storage costs.
However, the US is not going to run out of places to store all of the oil its producing.
This chart, from a note sent to Morgan Stanley research clients, shows the working capacity of storage facilities in the US versus the current stocks. As you can see, the stocks are much higher than average this year, but still a long way away from hitting full capacity.
This is what Morgan Stanley’s Brian Lasky has to say about storage (emphasis theirs):
Storage remains plentiful. We continue to hear confusion about US storage capacity, with many investors comparing inconsistent figures.We forecast storage capacity by type and sub-region with our detailed NAm balance.Tank farm working storage utilization could reach 73% in the US and 72% in PADDs 2-4,a record high, but well below past peaks at Cushing (88%).
So, the oil storage debate is over. For now.