Cushing Crude Oil Inventories: More Pain for Oil Prices?

Market surveys estimate that Cushing crude oil inventories rose from March 3–10, 2017. A rise in crude oil inventories at Cushing could pressure US crude oil (FXN) (SCO) (UCO) prices.

Lower crude oil prices will have a negative impact on crude oil producers’ earnings such as Noble Energy (NBL), Chesapeake Energy (CHK), Northern Oil & Gas (NOG), and Triangle Petroleum (TPLM).

On March 15, 2017, at 10:30 AM EST, the EIA (U.S. Energy Information Administration) will release its crude oil inventory report for the week ending March 10, 2017.

For the week ending March 3, 2017, the EIA reported that Cushing crude oil inventories had risen by 0.8 MMbbls (million barrels) to 64.4 MMbbls—compared to the previous week. Inventories rose 1.4% week-over-week, but fell 3.8% year-over-year. The rise in Cushing crude oil inventories pressured oil prices to a three-month low on March 9, 2017. For more on crude oil prices, read Part 1 of this series.

Cushing crude oil inventories hit 68.3 MMbbls, the highest point ever, in the week ending on 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 Reach a New All-Time High for more information on US crude oil inventories. 

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.

As you can see in the above graph, crude oil (VDE) (FENY (USO) prices and inventories have an inverse relationship. Cushing crude oil inventories have risen by ~5.5 MMbbls, or ~10.1%, in the last 15 weeks. High Cushing crude oil inventories could pressure crude oil prices to fresh lows.

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