Cushing Crude Oil Inventories: Bullish or Bearish for Oil Prices?



Cushing crude oil inventories  

Market surveys suggest that Cushing crude oil inventories rose from November 11–18, 2016. A rise in crude oil inventories at Cushing could limit the upside for crude oil prices. For more on crude oil prices, read Part 1 and Part 3 of the series.

Lower crude oil prices have a negative impact on crude oil and natural gas producers’ earnings such as ConocoPhillips (COP), Marathon Oil (MRO), Swift Energy (SFY), and Goodrich Petroleum (GDP).

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EIA’s crude oil inventory report 

On November 23, 2016, at 10:30 AM EST, the EIA (U.S. Energy Information Administration) will release its crude oil inventory report for the week ending November 18, 2016.

For the week ending November 11, 2016, the EIA reported that Cushing crude oil inventories rose by 0.7 MMbbls (million barrels) to 59.2 MMbbls—compared to the previous week. The inventories are near the lowest level since November 20, 2015. However, Cushing crude oil inventories were 4% higher than the same period in 2015.

Cushing crude oil inventories hit 68.3 MMbbls, the highest point ever, in the week ending May 13, 2016. New pipelines that came online in 2014 and 2015 led to the rise in Cushing crude oil inventories. Read US Crude Oil Inventories Overshadow the Crude Oil Market for more on US crude oil inventories.

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Cushing’s 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 US. Cushing’s crude oil storage capacity is 73 MMbbls.

Cushing’s crude oil inventories fell  

Cushing crude oil inventories have fallen 13.3% from their peak levels. Falling inventories could benefit crude oil prices. Higher crude oil prices have a positive impact on crude oil producers’ profitability such as ConocoPhillips (COP), Marathon Oil (MRO), Swift Energy (SFY), and Goodrich Petroleum (GDP).

Moves in crude oil prices impact funds such as the Vanguard Energy ETF (VDE), the iShares Global Energy ETF (IXC), the PowerShares DWA Energy Momentum ETF (PXI), the Direxion Daily Energy Bear 3x ETF (ERY), the iShares US Energy (IYE), the PowerShares DB Crude Oil Double Short ETN (DTO), the iShares US Oil Equipment & Services (IEZ), the ProShares UltraShort Bloomberg Crude Oil (SCO), the ProShares Ultra Bloomberg Crude Oil (UCO), and the ProShares Ultra Oil & Gas (DIG).

Next, we’ll analyze the US crude oil rig count for the week ending November 18, 2016.


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