3 Apr

High Cushing Crude Oil Inventories: Bearish Driver for Crude Oil

WRITTEN BY Gordon Kristopher

Cushing crude oil inventories  

Market surveys estimate that Cushing crude oil inventories rose from March 24–31, 2017. A rise in crude oil inventories at Cushing could pressure US crude oil (USO) (USL) (BNO) (RYE) prices.

Lower crude oil prices will have a negative impact on crude oil producers’ earnings such as Carrizo Oil & Gas (CRZO), Whiting Petroleum (WLL), Marathon Oil (MRO), and PDC Energy (PDCE).

High Cushing Crude Oil Inventories: Bearish Driver for Crude Oil

EIA’s crude oil inventory report

On April 5, 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 31, 2017.

For the week ending March 24, 2017, the EIA reported that Cushing crude oil inventories fell by 0.2 MMbbls (million barrels) to 67.7 MMbbls—compared to the previous week. Inventories fell 0.3% week-over-week, but rose 2.7% year-over-year.

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. 

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.

Impact  

As you can see in the above graph, crude oil (XES) (VDE) (IEZ) prices and inventories have an inverse relationship. Cushing crude oil inventories have risen by ~9 MMbbls, or ~15%, in the last 18 weeks—0.6% below their all-time highs. Near-record Cushing crude oil inventories could pressure crude oil prices to fresh lows.

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

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