Newspaper article THE JOURNAL RECORD

Energy Companies Calm Cushing Storage Issue

Newspaper article THE JOURNAL RECORD

Energy Companies Calm Cushing Storage Issue

Article excerpt

There's still a cushion in Cushing.

At least that's what energy producers told members of the Oklahoma Corporation Commission on Tuesday. Commissioners asked energy companies to address ongoing concerns about storage capacity at the Cushing storage facility, the New York Mercantile Exchange's delivery point of record that determines crude prices.

Consensus among those who responded was that while there isn't enough pipeline available for Cushing's capacity, there is no emergency and the prudent course of action is to wait until new pipelines are operational in 2011.

In the meantime, Oklahoma producers are unhappy that local sweet crude prices are being forced lower.

"Harold Hamm at Continental Resources made a presentation a couple years ago about a looming problem," Commissioner Jeff Cloud said. "We've been hearing recently that the problem is now occurring. We wanted to talk about what is the cause of that and why Oklahoma crude might be discounted compared to other crude that's stored there."

Concerns about filling Cushing's estimated 50-million-barrel capacity peaked early this year as demand sank and producers curtailed flow. Because the storage tanks at Cushing are privately operated, precise capacity is not publicly known.

Crude storage began to escalate when prices dropped 10 months ago. Devon Energy Vice President Todd Morgan said crude storage at the Cushing facility rose by 100,000 barrels per day from October to February, when it peaked at 34.9 million barrels. There are now 30.8 million barrels in Cushing tanks, still more than the 22 million barrels that were typical one year ago.

"In a time when every dollar counts, producers are adopting a wait-and-see attitude," Morgan said.

Morgan said the economy's tumble happened faster than producers could react, which affected storage levels. Additionally, he said, a fire at a Tyler, Texas, refinery and Hurricane Ike's disruption of Gulf of Mexico refinery business added to the Cushing glut. …

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