Posted 3 years ago
Nearly half of all oil pipelines from the Permian basin, the biggest U.S. oilfield, are expected to be empty by the end of the year, analysts and executives said. By the fourth quarter, total utilization of the largest oil pipelines from the Permian is expected to drop to 57%, consultancy Wood Mackenzie said. This comes after a peak that saw US crude production rise to a record 13 million barrels per day. But with the coronavirus pandemic drastically cutting demand for fuel and oil, the industry got crushed, leaving many major pipeline companies are exploring ways to ship other products in those lines and considering selling stakes in operations to raise cash.
The unexpected drop in demand hit pipeline companies hard, as the industry relies on long-term contracts that require customers to ship a certain volume of oil or pay a penalty. The drop in demand along with the long term nature of the deals meant pipelines were already set to come online, growing the gap between production and capacity. The gap rose to over 1 million bpd in February, according to energy research firm East Daley Capital.
Current US crude output is around 11 million bpd, and is not expected to grow much until 2022. "We do not expect to be at pre-COVID production levels by end-2022," said Saad Rahim, chief economist at commodities merchant Trafigura.
Topic: US News
Tags: US Energy Pipeline Oil Investment Energy Investment