Pipeline operators are asking oil producers to voluntarily reduce their output, in the clearest sign yet that a growing glut of crude is overwhelming storage capacity, Bloomberg reports.
Plains All American Pipeline (NYSE:PAA) sent a letter this week asking its suppliers to scale back production, while Plains and Enterprise Products Partners (NYSE:EPD) sent letters requiring customers to prove they have a buyer or place to offload the crude they are shipping, according to the report.
Ryan Sitton, a member of the Texas Railroad Commission, says on Twitter that pipeline companies are running out of storage space for oil as coronavirus related lockdowns cause demand to plunge.
On Friday, prices for physical delivery of several key crude grades in North America plunged to the lowest levels in decades, a clear indicator that North America’s storage system is nearing its limit.
West Texas Intermediate crude in the heart of the Permian Basin plunged yesterday to $13.01/bbl, the lowest since 1999, while Western Canada Select neared $5/bbl and Wyoming Asphalt Sour crude reportedly was bid as low as $0.95/bbl yesterday.