Shale Boom Sends U.S. Crude Supply To Highest Since 1930s

  • Date: 23/04/14
  • Mark Shenk, Bloomberg

The U.S. is stockpiling the most crude since the Great Depression, thanks to the shale boom that has boosted production to the most in 26 years.

Inventories rose 3.52 million barrels last week to 397.7 million, the highest level since 1931, according to Energy Information Administration data going back to 1920. Crude output climbed 59,000 barrels a day to 8.36 million, the most since January 1988, as the combination of horizontal drilling and hydraulic fracturing, or fracking, unlocked supplies from shale formations in the central U.S., including the Bakken in North Dakota and the Eagle Ford in Texas.

The burgeoning supply has sparked arguments over whether a 1975 law that prevents most U.S. crude exports should be repealed. It also may reduce the impetus for a quick approval of the Keystone XL pipeline moving Canadian crude to the U.S. Average weekly imports are down 3.7 percent so far this year, compared with the same period in 2013.

“This paints a secure supply picture for the U.S.,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “This will add to the political debate about exports and Keystone. Whatever issues arise, it’s important to remember you would rather deal with the problems of a supply glut rather than a dearth.”

Keystone XL

President Barack Obama’s administration said on April 18 that it will postpone a ruling on Keystone XL. The State Department said it wouldn’t make a recommendation until questions are resolved about the way the pipeline’s northern route through Nebraska was approved. The southern portion of the project began moving crude in January to the Texas Gulf Coast from Cushing, Oklahoma.

Inventories along the Gulf Coast, known as PADD 3, rose 2.44 million barrels to 209.6 million last week, the most in EIA data going back to 1990.

Much of that inventory is light, sweet crude, or oil with low density and sulfur content, from the shale fields. Many refineries along the Gulf Coast are designed to run most efficiently on cheaper heavy, sour barrels imported from Mexico and Venezuela.

“The problem is that we have a glut of light, sweet crude when what we need is sour,” Schork said. “There have to find a way to swap the barrels we’ve got in hand or exporting them, so we can take full advantage of the rise in output.”

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