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How Cushing Inventories Could Affect Crude Oil Prices

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Apr. 4 2016, Published 11:23 a.m. ET

Cushing crude oil stocks

Market data intelligence company Genscape reported that crude oil stocks at Cushing fell by 807,496 barrels between March 26, 2015, and March 29, 2016. The unexpected drawdown of Cushing crude oil stocks could support crude oil prices. Read more about the US crude oil prices in the first part of the series. The EIA (U.S. Energy Information Administration) reported that Cushing crude oil stocks fell by 0.27 MMbbls (million barrels) to 65.9 MMbbls for the week ending March 25, 2016, compared to the previous week.

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Cushing crude oil stocks hit record

Cushing crude oil stocks rose by 0.55 MMbbls (million barrels) to 67.5 MMbbls for the week ending March 11, 2016. This was the highest level for Cushing crude oil inventories ever. Cushing, Oklahoma, is the largest crude storage hub in the US and it is also the NYMEX crude oil futures delivery point. Cushing crude oil inventories rose to record levels due to new pipelines that came online in 2014 and 2015. 

Cushing’s crude storage capacity

Cushing’s crude oil storage capacity is 73 MMbbls. The ups and downs in crude oil inventories impact storage costs. For more on this, read Crude Oil Storage Costs Rose 9 Times, US Crude Tests New Limits and Record US Crude Oil Inventory Led to a New Storage Space. 

Nationwide crude oil inventories rose by 2.3 MMbbls (million barrels) to 534.8 MMbbls between March 18, 2016, and March 25, 2016. Current inventory levels are the highest on record. To learn more, read Pressure for Crude Oil Prices? Inventory Rose for the Seventh Week.

Impact of Cushing and nationwide crude oil inventories 

Cushing crude oil stocks fell for the second consecutive week for the week ending March 25, 2016. This might benefit crude oil prices. High crude oil prices benefit oil producers like Denbury Resources (DNR) and Goodrich Petroleum (GDP). However, Cushing crude oil stocks are 15% higher than they were in the corresponding period in 2015. They are also near all-time record levels. This could limit upside for crude oil prices. Record nationwide crude oil inventories and the contango market benefit crude oil tanker companies like Frontline (FRO), Nordic American Tankers (NAT), Teekay Tankers (TNK), DHT Holdings (DHT), and Tsakos Energy Navigation (TNP).

The rise and fall in the crude oil market impacts the United States Oil Fund (USO), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the ProShares Ultra Oil & Gas (DIG), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), and the Fidelity MSCI Energy (FENY).

In the next part of this series, we’ll discuss OPEC crude oil production in March 2016 ahead of the oil producers’ meeting.

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