Energy Prospectus

Cushing is currently at 77% of working capacity – the highest in roughly two years, but short of the record of 91% in early 2011.

http://www.oilandgas360.com/cushing-inv ... 1-26401157

Adam Longson, CFA, CPA – Morgan Stanley
March 25, 2015 4:18 AM GMT
US crude oil faces a structural and seasonal challenge, but 2015 is unlikely to be the tipping point.
US crude stocks will build through May, but there is plenty of storage. Tank farm utilization in PADDs 2-4 is should peak near 72%. However, record builds should support bearish sentiment for now.
Any extreme WTI bear case is unnecessary. The system is more flexible than most realize. Full storage will never be realized because regional diffs move as congestion builds, allowing access to alternative storage, markets and clearing mechanisms. And unlike past years, infrastructure is no longer a constraint.
US storage is more important for structure than price. Global dynamics are more important for price levels. The relationship between US storage and WTI is negligible. Regional diffs drive crude flows and will be dictated by the cost to clear markets, which can occur in a rising or falling WTI price environment.
Plenty of levers are available beyond storage, but require proper diffs. $8-13/bbl WTI-Brent should be sufficient to open arbs for now, but wide diffs are likely into 2H15 and beyond without a policy change.
Stock implications. Most positive: Refining (VLO, MPC, PSX, PBF, HFC). Storage focused MLPs ( PAGP/PAA, SXL, and EPD).
Bearish headlines for US crude, but a disaster scenario is unlikely. While the US faces a structural problem, 2015 is unlikely to be the tipping point. The build in US crude stocks is driven by North American specific issues. Similar to 1H14, we see crude stocks building to record levels, but peaking in May at 115 mmb higher YoY – still well below tank tops. The US still has many outlets, which should avoid catastrophe. US diffs need to support these efforts going forward, but these can occur with any WTI price. That said, the trend in US data coupled with oversupply fears may pressure pricing and structure more than is ultimately required.

CRUDE OIL INVENTORY/’000 bbls (Week Ended 3/20/15)

Current: 466,678
Actual Build/(Withdrawal): 8,170
Economist Average Estimate: 4,913
Previous: 458,508

Total U.S. storage capacity, including pipeline fill and field level storage, is approximately 640 million bbls.