The crude oil stockpiles in Cushing, Oklahoma, have reached their lowest levels in 14 months, raising concerns about the quality of the remaining oil and the potential for falling below minimum operating levels. This reduction in stockpiles, combined with supply cuts from Saudi Arabia and Russia, has contributed to a tight market and could put upward pressure on oil prices. On Tuesday, Nymex crude for November delivery settled at $90.39 per barrel, while Brent crude closed at $93.96 per barrel.
Cushing’s inventory levels have dropped by almost half since reaching a two-year high in June, and analysts predict another drawdown of up to 1 million barrels in the week ending September 22. When storage falls below 20 million barrels, which equates to 10%-20% of Cushing’s capacity, it becomes operationally challenging to remove the oil. Strong refining demand, increased crude exports, and weaker future prices compared to spot prices have been the primary factors contributing to the decline in Cushing’s oil stockpiles.
While some analysts believe that seasonal refinery maintenance will somewhat increase crude stocks, others warn that refiners may quickly exit maintenance to keep up with high fuel demand. In addition to these developments, the U.S. Interior Department has postponed a sale of Gulf of Mexico drilling rights following a court ruling that ordered the Biden administration to expand the sale.
