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Cushing Crude Oil Inventory: More Heat for Oil Prices?

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Cushing crude oil inventory 

The latest data from Genscape show that the crude oil inventory at Cushing, Oklahoma, rose by 503,000 barrels between February 19 and February 24, 2016. The API (American Petroleum Institute) reported that the Cushing crude oil inventory rose by 0.31 MMbbls (million barrels) for the week ending February 19, 2016. The EIA (U.S. Energy Information Administration) reported that the Cushing crude oil inventory rose by 333,000 bpd (barrels per day) to 65 MMbbls for the same period. To learn about the effects of rising inventory, read How US Crude Oil Storage Utilization Has Reached 60% of Capacity. Also, read Crude Oil Storage Costs Rose 9 Times, US Crude Tests New Limits.

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Cushing crude oil inventory hits record 

The Cushing crude oil inventory has risen due to the increase in supply as a result of new pipelines coming online and the increase in storage capacities in response to long-term oversupply concerns. The pipeline infrastructure in this area is the Keystone pipeline owned by TransCanada (TRP). The rise in the Cushing crude oil inventory might boost crude oil and refined products exports. However, the current WTI-Brent spread makes US crude oil exports unviable.

The current Cushing inventory is the highest ever. It’s also 50% more than 2015 levels. Read Which US Regions Affected the Overall EIA Crude Oil Inventory? to learn more about nationwide and regional crude oil inventories. Read How Gasoline Inventory Supported Crude Oil Prices and Did the Distillate Inventory Diverge from Crude Oil Prices? for gasoline and distillate updates.

Impact 

The consensus of rising Cushing crude oil inventories will put pressure on oil prices and oil producers like Chesapeake Energy (CHK), Devon Energy (DVN), and Pioneer Natural Resources (PXD). However, the increase in supply and the contango market have led to storage opportunities. This benefits oil storage and transportation companies like Williams Companies (WMB), DCP Midstream Partners (DPM), ONEOK (OKE), Spectra Energy (SE), and Kinder Morgan (KMI).

ETFs and ETNs such as the VelocityShares 3x Long Crude Oil ETN (UWTI), the Direxion Daily Energy Bull 3x Shares ETF (ERX), and the iShares Global Energy ETF (IXC) are influenced by the ups and downs in the oil and gas market.

In the next part of this series, we’ll discuss how the US crude oil rig count could influence the crude oil market.

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