Looking back a year ago there was an oil glut in Cushing Oklahoma. The oil coming in far exceeded Cushing's capacity to push it south. At the same time, refiners on the Gulf Coast began bringing on capacity expansion projects increasing the demand in the region. That set up a classic supply and demand imbalance. Any “Economics 101” student can you tell you what happened next - a dislocation in price for oil in the two regions.
And with price inefficiency comes opportunity, for both traders (arbitrage, etc.) as well as refineries and service providers. Pipelines were planned and some were reversed - all to move oil from an area of low value to an area of higher value.
Now let’s fast-forward to today. Cushing no longer has a glut of oil. Oil prices in Cushing and Houston are balanced. But that means there is more oil in Houston. Does that mean there is now the danger of a glut in Houston? Not likely. Houston is a major port with a significant refinery and petchem industry with a big thirst. The local industry will be more than satisfied with the taps wide open from the North. What of the excess you ask? That will be shipped to other refiners on the Gulf Coast, East Coast and perhaps even Eastern Canada. The Marine terminal infrastructure in Houston is going to become more active. Terminal operators are either building more capacity or coming up with ways to increase dock throughput.
There will likely be no oil glut in Houston, but there will be an increase in marine terminal activity that prevents it.
In the last two years, over 50 petrochemical terminals have deployed PortVision’s TerminalSmart platform to optimize and manage marine operations at refineries and midstream facilities. Are you seeing change in the operations environment around your marine terminal? Then drop us a line, and let’s figure out how to turn that “change” into “opportunity”.