A significant oil spillage of around 14,000 barrels of crude oil that occurred on December 7 in Nebraska has caused speculation among traders, who are wondering whether this will cause a repeat of the previous Keystone leak that resulted in a shutdown that lasted for 13 days back in 2019.
Canadian Petroleum Inventory
In the week before the spillage, the inventories of Canadian crude oil were declared as being just shy of 29 million barrels, with a spare capacity of 16 million barrels. This placed Western Canadian inventories in a very healthy position.
Canadian Crude Oil Prices
Most likely as a result of the healthy inventory position, the prices of Canadian crude oil are remaining steady at the moment, with the Western Canada Select (WCS) reporting trade at $28.20 per barrel. This is only slightly below the prices that were seen prior to the spillage.
The US Situation
American analysts of the situation are not currently concerned about the inventory or prices, noting that the Gulf Coast is well supplied and there is also the potential to divert Latin American or Colombian barrels to the Gulf if required.
American Gulf stocks are at approximately 226.5 million barrels, while the U.S. crude storage hub at Cushing, Oklahoma, has inventory totaling 28.3 million barrels. This is approximately a third of the capacity of the hub but still well below historical utilization rates, which gives no reason for concern.
Recently, the prices of U.S. crude oil increased slightly as refiners began to seek alternatives to the Canadian supply. At West Texas Intermediate, figures have seen a spike of more than 6% as traders begin to anticipate an ongoing shutdown causing a knock-on impact to the inventory at Cushing.
Likely Outcome
The leg of the Keystone that flows into Patoka, Illinois, has been unaffected by the spillage, and there is a possibility that it could therefore be reopened shortly. However no formal confirmation of this position has been received. This means that news of a partial re-opening is currently mere speculation, but it is helpfully causing crude oil prices at Cushing to remain in a stable position.
The American Petroleum Institute was expected to release a statement, with the US Energy Department following suit. The data provided by these organizations will help to determine what the next steps will be when it comes to partially or fully re-opening the Keystone and ensuring the continued stability of crude oil prices, as well as sufficient inventory to fulfill all existing obligations.
Led by the United States Environmental Protection Agency in conjunction with TC Energy Corp, who owns the Keystone pipeline, the cleanup of the spillage is continuing, and lessons will be learned from the event that can hopefully prevent it from happening again.
At the moment, no official timeline has been confirmed for re-starting the line. Regulatory approval will be required prior to its reopening. It is anticipated that the pipeline will remain closed for several more weeks and that the 14 landowners who have been affected by the spillage will be compensated.
It is unlikely that Canadian oil inventory or prices will see much impact from this event.