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Cushing inventories decline for first time in five weeks

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Cushing inventories

Crude supplies at Cushing, Oklahoma, decreased by 551,000 barrels to 20.8 MMbbls (million barrels) in the week ended October 31. Cushing, Oklahoma, is an important hub where West Texas Intermediate (or WTI) crude oil is priced.

Cushing inventories previously rose for four consecutive weeks. Last week’s decline indicates the end of refinery maintenance season, as discussed in Part 3.

cushing crude

Long-term declining trend at Cushing

The main reason why Cushing inventories declined as drastically as shown in the graph above is the new infrastructure that came online this year. These new pipelines have enabled increased movement of crude out of Cushing to the Gulf Coast.

The new infrastructure includes TransCanada Corporation’s (TRP) Keystone XL Pipeline, Enterprise Product Partners, L.P. (EPD) and Enbridge’s Inc.’s (ENB) joint venture Seaway pipeline, and Magellan Midstream Partners LP’s (MMP) Longhorn pipeline, as well as the Cushing Marketlink pipeline.

Will the declining trend continue?

As new pipelines come online to bring more crude from Canada and the Bakken in North Dakota to Cushing, the downward trend in inventories may not persist.

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The Pony Express is operated by Tallgrass Energy Partners LP (or TEP). It connects Cushing with Guernsey, Wyoming. The project was completed earlier in October and has started commercial services. The pipeline transports Bakken crude to Cushing. Enbridge’s Flanagan South pipeline project, which will run through Illinois to Cushing, is also expected to come online later this year.

As these pipelines come online, Cushing inventories will likely stabilize. And as more pipelines come online, inventories may even start to rise again.

Midstream companies play an important role

The midstream sector plays an important role in laying out infrastructure based on which crude inventories move.

Some of the midstream companies mentioned above are components of the Alerian MLP ETF (AMLP). Enbridge is a component of the Alerian Energy Infrastructure ETF (ENFR).

In the next part of this series, read about movement in WTI prices last week. 

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