Oil prices likely to dip as USA runs out of storage place

04-Mar-15

The U.S. has so much crude that it is running out of places to put it, and that could drive oil and gasoline prices even lower in the coming months, as per The Associated Press. For the past 7 weeks, the United States has been producing and importing an average of 1 mln more barrels of oil every day than it is consuming. That extra crude is flowing into storage tanks, especially at the country's main trading hub in Cushing, Oklahoma, pushing U.S. supplies to their highest point in at least 80 years, the Energy Department reported last week. If this continues, the storage tanks could approach their operational limits, known in the industry as "tank tops," by mid-April and send the price of crude, and probably gasoline, too, plummeting. Analysts agree that crude is poised to fall sharply because it continues to flood into storage for a number of reasons: * U.S. oil production continues to rise. Companies are cutting back on new drilling, but that won't reduce supplies until later this year. * The new oil being produced is light, sweet crude, which is a type many U.S. refineries are not designed to process. Crude exports are restricted by federal law. * Foreign oil continues to flow into the U.S., both because of economic weakness in other countries and to feed refineries designed to process heavy, sour crude. * This is the slowest time of year for gasoline demand, so refiners typically reduce or stop production to perform maintenance. As refiners process less crude, supplies build up.