Forward US crude storage demand reveals prolonged need

US crude storage demand has risen for forward months extending as far out as 2021, indicating that storage needs may be increasing beyond the prompt delivery period amid low demand due to the Covid-19 pandemic.

Prompt June US crude prices in the physical pipeline markets remain discounted to second-month July deliveries on average, although the gap has been narrowing. Paired with the growing interest in a number of crude storage auctions around the country, it may be a sign in greater confidence in storage economics beyond 2020, with prompt prices at deeper discounts to forward prices in 2021.

Argus Forward Curves as of 1 May indicate domestic sweet crude at Cushing, Oklahoma, for June delivery is at roughly a $2.50/bl discount to July delivery, although the gap grows to about $9.55/bl by January 2021, and to about $14.05/bl by December of next year.

In the midcontinent storage market, American Midstream Partners is offering 3.6mn bl of crude storage space from the first quarter of 2021 to the fourth quarter in tomorrow's auction for space at Cushing, Oklahoma. The company sold 100pc of its 3.6mn bl offered storage space for the first half of 2021 in its most recent auction on 21 April, after selling no storage for the same period in its auction held 7 April.

At the US Gulf coast, the Louisiana Offshore Oil Port (LOOP) is offering 8.4mn bl of crude in tomorrow's LOOP Sour storage space auction, including 5.7mn bl from the first quarter of 2021 to the third quarter of 2021.

LOOP sold 100pc of the 11.1mn bl of storage space offered in its 7 April, including 6.9mn bl of space from the first quarter to the third quarter of 2021, up from 1.5mn bl of space from the first quarter to the second quarter of next year in its 4 March auction. Crude grades that can be stored in LOOP Sour storage include medium sour Mars, Poseidon, Iraqi Basrah, Arab Medium and Kuwaiti. Once crude is delivered from the LOOP Sour cavern space, it is traded as LOOP Sour crude.

Although Mars has been at a prompt June premium to second-month July delivery for two consecutive days, June Mars still averages a roughly 30¢/bl discount to July Mars as of 1 May. As for the grade's daily close, June Mars was roughly at an 80¢/bl premium to July Mars at the end of last week, flipping from roughly a $2.15/bl discount when the week began.

Argus Forward Curves from 1 May indicate June Mars at roughly a $5.20/bl discount to January 2021 Mars, with the contango trend deepening as prompt Mars is at roughly an $9.20/bl discount to December 2021 Mars.

By Alex Endress