Oil inventories in Edmonton have surged to a record high, but for different reasons than in Cushing, Okla., where brimming stockpiles have contributed to slumping crude prices and put pressure on struggling producers to cut costs and sell assets.
Crude in storage in Edmonton and Hardisty, Alta., to the east, surged by one million barrels last week, according to market intelligence provider Genscape. The gains were part of an overall Canadian oil storage build of 2.6-million barrels according to the firm's estimates, gleaned through the use of infrared cameras and mounted on aircraft and other high-tech gear.
Genscape said that, at more than 10 million barrels, Edmonton terminals are at 64 per cent of capacity, which is actually lower than the record percentage due to major construction of tanks in the past three years there. However, the all-time high of 67 per cent could be beat in the next week, the firms said.
The situation is likely to be temporary, though. Most of the tankage in Edmonton and Hardisty, hubs for crude from the oil sands, is largely for logistical use, as Enbridge Inc. and other pipeline operators schedule shipments to the U.S. Midwest and elsewhere.
A new pipeline between Edmonton and Hardistry is due to come into service in the coming weeks, which should ease a bottleneck that has contributed to the glut, said Genscape analysts.
"We think the builds we're seeing now are more operationally based – there's more inflow than outflow," said Hillary Stevenson, manager of the firm's supply chain network. "Whenever that situation rebalances itself we expect things to start going back down."
It's a different story in the United States. The U.S. Energy Information Administration said this week that inventories logged the latest in a series of 80-year highs, climbing 8.2-million barrels to 466.7 million.
The glut of crude in storage has been cited as a major factor in the stubborn weakness in benchmark West Texas Intermediate prices. The oversupply has been particularly acute at the Cushing hub.
Meanwhile, U.S. oil production climbed slightly to 9.42-million barrels per day, despite major reductions by producers in spending on drilling in prolific shale formations such as the Bakken in North Dakota and Permian in Texas.
Inventories have brimmed as players seek to store cheap volumes for the short term for sale at higher prices later.
WTI fell 5 per cent to $48.87 a barrel on Friday on easing worries about the potential for supply disruptions as a result of conflict in Yemen.