As U.S. oil production reaches record highs, the number of above ground storage tank constructions is likewise on the rise — but may not be able to keep up.
According to a February 13 Reuters article, the hub of U.S. surplus oil steel storage tanks located in Cushing, OK, is used to store about half of the country’s excess crude oil. And if this surplus keeps pouring into Cushing’s field erected tanks at the rate it has been, experts estimate these tanks will reach their maximum capacity as early as April or as late as July.
Despite the fact that global crude oil prices have fallen by more than 60% since last June, U.S. oil companies are continuing to ramp up production in an effort to compete with organizations like the Organization of the Petroleum Exporting Countries (OPEC). This sustained production is far outpacing demand for oil, leaving the U.S. with a ton of extra oil on its hands.
Throughout the last 10 weeks, approximately 550,000 barrels per day (bpd) of crude oil have been poured into storage tank constructions across the country — about one-quarter of the total global surplus. At the storage tank facility in Cushing, delivery of oil barrels jumped from about 11 million barrels in December to almost 42.6 million barrels in January, Reuters reports.
And when the Cushing facility’s capacity is reached in April or July, the surplus American oil will have no choice but to spill over into the wider market for crude oil, which could have even more disastrous effects for oil prices.
“Once it’s full, the market will puke,” one oil trader told Reuters.
With the storage tanks at Cushing expected to reach capacity in as little as a few weeks, it’s clear that U.S. oil companies will have no choice but to slow drilling efforts — or deal with the consequences of an even more over-saturated market.
What do you think about American oil companies’ excess oil production? What should storage tank construction companies keep in mind while working to find solutions for this surplus product? Share your thoughts with us in the comments below.
