Inventories at this key crude hub at the lowest in a decade for this time of year
The expanded pipeline has moved about 400,000 barrels of crude a day since starting operations in May, and Cushing’s tanks have lost almost 13 million barrels of oil during that span. Flows of Canadian crude to the U.S. Gulf Coast have declined to the point where a competing pipeline system owned by Enbridge Inc. mostly operated without the congestion it typically experiences during the U.S. summer driving season.
European demand for U.S. crude is also pulling barrels out of storage at Cushing, traders said, particularly since buyers are on the hunt for similar grades after supply disruptions in Libya.
“With Libya risks, I tend to think storage will stay at tank bottoms in the near term, and the market will make WTI too expensive to export,” said Scott Shelton, an energy specialist at TP ICAP Group Plc.
The continued drawdowns at Cushing have helped prop up the price spread between the nearest two WTI futures contracts. The spread is hovering near US$1 a barrel after climbing to the highest levels in nearly a month.
Movements in crude spreads are a closely watched gauge for supply-demand balances, and they are currently signalling a dearth of barrels for immediate delivery despite worries about a longer-term oversupply of oil.
Cushing’s current stockpiles of about 22.7 million barrels represent less than a third of the hub’s working capacity of 78 million barrels. The rapid decline is stoking concerns that the hub’s ability to operate normally may be threatened. Pipeline operators at the storage hub didn’t immediately respond to requests for comment.