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Why Are Cushing Crude Oil Stocks Crushing Crude Oil Prices?

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API and Genscape: Cushing crude oil stocks

On February 11, 2016, Genscape reported that Cushing crude oil stocks rose by 425,000 barrels from February 6, 2016, to February 9, 2016. The consensus of rising Cushing crude oil stocks is weighing on crude oil prices. To learn more about crude oil prices, read the previous part of the series. The API (American Petroleum Institute) reported that Cushing crude oil stocks rose by 0.72 MMbbls (million barrels) for the week ending February 5, 2016—compared to the previous week. Cushing, Oklahoma, is the largest crude oil storage hub in the US. It’s the delivery point for crude oil futures contracts trading in NYMEX.

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EIA’s report

The EIA (U.S. Energy Information Administration) reported that Cushing crude oil stocks rose by 523,000 barrels to 64.7 MMbbls for the week ending February 5, 2016. This is the highest number of Cushing crude oil stocks since April 2004. Rising crude oil stocks impact crude oil storage costs and crude oil prices. To learn more, read Crude Oil Storage Costs Rose 9 Times, US Crude Tests New Limits. Cushing crude oil stocks are also 58% more than the five-year seasonal average. To learn more about nationwide crude oil stocks read EIA’s Crude Oil Inventory Report Surprised Bearish Traders. To learn more about gasoline stocks read Larger Rise in Gasoline Inventories Impacted Crude Oil Prices. Read Rising Distillate Inventory Pressures Oil Prices for an update on distillates.

Why Cushing stocks tested a new record 

Cushing crude oil stocks tested a new record due to new pipelines coming online in 2015. The pipeline infrastructure in this area includes the Keystone pipeline. It’s owned by TransCanada (TRP). Record Cushing crude oil stocks will support crude oil exports. However, the current WTI-Brent spread makes US crude oil exports unviable. Lately, crude oil storage capacities increased due to long-term oversupply concerns and rising crude oil stocks.

Record US crude oil inventories and the wider contango market supported oil tankers like Teekay Tankers (TNK) and Tsakos Energy Navigation (TNP). The rise in inventories in land and sea also benefit oil and gas storage and transportation companies such as Williams Companies (WMB), Spectra Energy (SE), and Kinder Morgan (KMI).

Long-term lower oil prices impact oil producers such as Hess (HES), Energy XXI (EXXI), and Halcon Resources (HK). ETFS like the United States Oil Fund (USO), the PowerShares DB Oil Fund (DBO), and the iPath S&P GSCI Crude Oil Total Return ETN (OIL) are also influenced by volatile oil prices.

In the next part of this series, we’ll discuss the US crude oil rig count in more detail.

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