Buckeye Partners LP operates this tank farm on Buckeye Road in Lower Macungie Township. (THE MORNING CALL FILE PHOTO)
Yet another Texas terminal is preparing to export oil, even as the pandemic continues to hammer global demand for U.S. crude.
Buckeye Partners LP expects to start loading ships with oil for export
in the second half of July, after receiving crude at its South Texas
Gateway terminal in the Port of Corpus Christi about a month earlier
than planned. At least 15 other terminals have started exporting U.S.
crude in recent years, encouraged by record shale production and growing
demand for barrels in Asia. In April, Mercuria Energy Group-backed Pin
Oak Terminals became one of the latest to start exports at its Corpus
Christi terminal.
The projects come at a tough time for the oil industry, which has
been upended by the coronavirus pandemic. As the virus wreaks havoc on
global markets, American oil exports have tumbled from a record high of
3.7 million barrels a day in February to around 3 million barrels in
April. Shipments were around 2.4 million barrels a day during the first
week of June.
The launch of the Buckeye and Pin Oak terminals at a time like this
signals that exporters believe demand will eventually recover, said Pin
Oak Chief Executive Corey Leonard. While both projects were under
development years before the current health emergency — with shippers,
contracts and finance already lined up — they could have deferred their
commission by a month or two if market conditions called for it. Instead, they’re pushing ahead.
“If our customers were communicating an inability to source barrels
or deliver barrels at the time of commissioning because of the pandemic,
additional pathways would have been explored to support both our
customers and our facilities for that short period of time,” he said.
Since Pin Oak’s first tanker loading, activity has been brisk, he
said, with barrels heading to various destinations including the U.S.
Virgin Islands for re-export to China.
Still, the post-virus outlook for petroleum consumption isn’t exactly
rosy. An expected global recession could weigh on demand through 2022
at least, according to industry experts. A return to record domestic
crude production, which had underpinned the surge in U.S. oil exports,
will also be difficult with prices still hovering below $40 a barrel.
One option for terminals if shipments continue decline is loading
vessels to operate as floating storage until demand perks up again. The
practice is becoming more common, with nearly 185 million barrels of
crude aboard floating storage for the week ending June 5, up over 16
million from the week prior, according to data from Vortexa Ltd., a data
analytics firm.
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