How Cushing Inventories Could Affect Crude Oil Prices in 2017


Nov. 20 2020, Updated 5:00 p.m. ET

Cushing crude oil inventories  

Market surveys suggest that Cushing crude oil inventories rose between December 16 and December 23, 2016. A rise in crude oil inventories at Cushing could limit the upside for US crude oil (PXI) (USO) (ERY) (UCO) (IXC) (IYE) prices.

Crude oil prices affect the earnings of crude oil and natural gas producers such as Marathon Oil (MRO), ConocoPhillips (COP), Occidental Petroleum (OXY), Synergy Resources (SYRG), Swift Energy (SFY), PDC Energy (PDCE), and Goodrich Petroleum (GDP).

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EIA’s crude oil inventory report  

On December 29, 2016, at 10:30 AM EST, the EIA (U.S. Energy Information Administration) will release its crude oil inventory report for the week ending December 23, 2016.

For the week ending December 16, 2016, the EIA reported that Cushing crude oil inventories fell by 245,000 barrels to 66.2 MMbbls (million barrels) compared to the previous week. Cushing crude oil inventories were 6.7% 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 Supported Crude Prices for more on US crude oil inventories. 

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 fell 2.9% from their peak levels. Falling inventories could benefit crude oil prices. As you can see in the above graph, crude oil prices and inventories have an inverse relationship. However, Cushing crude oil inventories have risen 7.2 MMbbls, or 12%, in the last five weeks. High Cushing crude oil inventories could pressure crude oil prices in 2017.

Lower crude oil prices have a negative impact on crude oil producers’ profitability such as Marathon Oil (MRO), ConocoPhillips (COP), Occidental Petroleum (OXY), Synergy Resources (SYRG), Swift Energy (SFY), PDC Energy (PDCE), and Goodrich Petroleum (GDP).

Volatility in crude oil prices impacts funds such as the Vanguard Energy ETF (VDE), the iShares US Oil Equipment & Services (IEZ), the ProShares UltraShort Bloomberg Crude Oil (SCO), and the ProShares Ultra Oil & Gas (DIG).

Next, we’ll analyze the US crude oil rig count for last week.


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