Cushing Oklahoma Hub Shrinks Drops US Oil Inventories, EIA Says

U.S. crude inventories have fallen significantly this year amid rising demand and reduced production, with inventories in the Cushing, Oklahoma center driving the downtrend.

Cushing shares totaled 32.9 million barrels for the week ended September 10, down 42% from the start of the year, the United States Energy Information Administration (EIA) said on Tuesday in a research note. Oil inventories in Cushing were 26% below the previous five-year average, the agency said.

For the United States as a whole, oil inventories last week, excluding strategic oil reserves, fell 6.4 million barrels from the previous week. At 417.4 million barrels, total national stocks were about 7% below the five-year average, the EIA said.

The Cushing hub is critical as it is the delivery point for the West Texas Intermediate (WTI) crude futures contract. WTI prices topped $ 70 / bbl in intraday trading on Tuesday; the US benchmark is up about 35% in 2021.

The EIA noted that Cushing is home to 14% of domestic commercial reservoirs and underground oil storage capacity. Cushing had a storage capacity utilization of 43%, the agency said, the lowest point since 2018.

The agency said the drop in Cushing coincides with a rebound in domestic and global oil demand this year, after a sharp destruction in demand amid the coronavirus pandemic in 2020.

The WTI contract went into negative territory in April 2020 amid the fallout from virus outbreaks, but oil markets have rebounded strongly in recent months.

Demand has increased for much of the spring and summer of this year as the vaccine rolls out. The United States and other major economies have adjusted to the pandemic despite the Delta variant of the virus, and travel has rebounded, leading to the consumption of petroleum-derived fuels.

US oil production, meanwhile, has only increased.

For the September 10 EIA reporting period, production stood at 10.1 million bpd, up from 10.0 million bpd the week before, according to the Weekly Petroleum Status Report from the agency. Production had fallen during the week ended September 3, from 11.5 million barrels per day before Hurricane Ida. The storm initially took more than three-quarters of oil production in the Gulf of Mexico (GOM) offline.

Before Ida, however, production was still more than 1.0 million bpd below the 2020 peak reached last March before the pandemic. This year, producers have pledged to stick to conservative positions imposed by viruses on production, despite the price recovery.

Demand, meanwhile, was also down last week due to Ida’s fallout. It fell 0.2% wk / wk and held near lows for the week of September 3, when demand fell 13% due to flooding and cold winds in Ida’s wake. Outside of GOM, however, demand generally remained strong.

The total product delivered – EIA’s terminology for demand – has grown significantly over the past four weeks, averaging 21.1 million bpd. This is an increase of 17% over the same period last year. This included sharp increases in demand for motor gasoline, distillate fuels and jet fuels. The result: lower oil inventories, according to the EIA. According to its latest Petroleum Supply Monthly, the nationwide drop of 35 million barrels in June was the biggest drop in U.S. crude inventories since the agency began releasing data in 1981.

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Felix J. Dixon