As of April 15, there were roughly 539 million barrels in storage. Assuming about 20% of the 539 million barrels are in transit (not actually in storage tanks), we can conclude that approximately 78% of crude oil storage capacity is being utilized.
Let me be clear that 539 million barrels in storage is not something we should gloss over. Looking at the chart below, you can see that storage is currently at its highest level since 1982.
One reason for the high storage levels is that producers are waiting for the price of oil to increase before selling. According to the EIA, the WTI crude oil futures price was $43.73/bbl as of April 22, whereas the spot price last week sat just south of $40/bbl. This could be a signal that prices are moving in the right direction which gives producers incentive to hold their crude for the time being.
The most important thing when it comes to storing anything is striking the right balance. If you’ve ever owned a storage unit, you know that eventually, it makes sense to sell the items you’ve been keeping rather than continue to pay the fees. You may think that someday you’ll need the 1950’s diner-style booth that’s been in a 5×5 unit for two years, but the reality is that paying more to store it than what it costs to buy another one is totally nuts. Similarly, producers are not going to store their oil forever because there will come a day when the benefit to selling their stockpiles outweighs the benefit of storing. This will be an interesting topic to revisit around this time next year to see how much more storage will be built. Will more storage keep the spot price lower for longer? What will the storage utilization rate be if the supply/demand equation balances out? What will it be if it doesn’t balance out? Stay tuned for an update in 2017 and in the meantime, don’t spend your time worrying about what could happen.