Gray Oak oil pipeline offers “on system” storage

Phillips 66 will offer "on system crude storage" on its 900,000 b/d Gray Oak pipeline from the Permian basin in west Texas to the US Gulf coast, citing an urgent need from shippers.

The company said the storage is being offered "in response to fast-developing market conditions" and "an urgent need for temporary storage," according to a filing today to the US Federal Energy Regulatory Commission (FERC).

Phillips 66 is asking for the new tariff to be in place by 5 April.

The move comes as some oil producers are struggling to find a home for crude as efforts to combat the coronavirus pandemic and a crash in crude prices have upended markets.

Gray Oak stretches from the Permian basin and the Eagle Ford shale in south Texas to Corpus Christi and to the Sweeny area south of Houston, including to Phillips 66's 247,000 b/d Sweeny refinery.

The pipeline started initial service last year to the Corpus Christi destinations and is expected to be in full service in the second quarter.

Overall US crude inventories are starting to swell. US crude stocks rose by 13.8mn bl to 469.2mn bl last week, the Energy Information Administration (EIA) said. It marked the tenth consecutive week of builds and was the largest weekly increase since October 2016.

The US administration is offering to lease up to 77mn bl of storage capacity in its Strategic Petroleum Reserve (SPR) to oil producers struggling to find a home for crude.

By Eunice Bridges