Could Cushing Crude Oil Inventories Curb the Drop in Oil Prices?



Cushing crude oil inventory estimates

Market intelligence company Genscape reported that Cushing crude oil inventories fell by 1 MMbbls (million barrels) between June 18, 2016, and June 21, 2016. The decrease in crude oil inventories benefits crude oil prices. For more on crude oil prices, read the first part of this series.

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EIA’s Cushing crude oil inventory report 

The EIA (U.S. Energy Information Administration) reported that Cushing crude oil inventories fell by 1.3 MMbbls to 65.2 MMbbls for the week ending June 17 compared to the previous week. On the other hand, a Platt’s survey suggested that Cushing crude oil inventories grew by 904,000 barrels during the same period.

Cushing crude oil inventory near peak level 

During the week ending May 13, Cushing crude oil inventories hit 68.3 MMbbls—the highest level ever! For more on nationwide crude oil inventories, read US Crude Oil Inventories Fell for the Fifth Straight Week.

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Storage capacity

Cushing, Oklahoma, is the delivery point for crude oil futures contracts trading on NYMEX. It’s also the largest crude oil storage hub in the country. The crude oil storage capacity at Cushing, Oklahoma, is 73 MMbbls. New pipelines in 2014 and 2015 led to the rise in Cushing crude oil inventories.

Near-record Cushing crude oil inventories 

Cushing crude oil inventories are 16% higher than in the corresponding period in 2015. Near-record Cushing crude oil inventories could limit the upside potential for crude oil prices. Multiyear-low crude oil prices negatively impact the margins of oil producers such as Halcón Resources (HK), Triangle Petroleum (TPLM), and Goodrich Petroleum (GDP).

The uncertainty in the crude oil prices also affects ETFs like the Vanguard Energy ETF (VDE) and the iShares U.S. Oil Equipment & Services ETF (IEZ).

Next, we’ll take a look at the latest update on the US crude oil rig count. 


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