Oil tanks running dry at biggest U.S. hub
Crude tanks at the largest U.S. storage hub and the pricing point for millions of dollars worth of oil contracts are running dry, threatening their ability to operate normally and sending prices for nearterm supplies surging.
Stockpiles at Cushing, Okla. — the delivery point for benchmark U.S. crude futures — tumbled to less than 22 million barrels last week, the lowest since July 2022, according to government data. Stockpiles have tumbled for seven straight weeks and and now sit just above seasonal lows last seen in 2014. At these levels, many traders consider inventories to already be at the lowest levels that allow tanks to function normally.
The situation is forcing some traders to pay up big for last-minute supplies at Cushing.
However, the U.S. refinon
ery maintenance season is getting underway, likely preventing the storage hub from draining to absolute lows. Still, exports remain a wild card for balances, given that demand for American oil is high amid OPEC+ supply curbs, meaning domestic users will likely have to pay up to keep barrels in the U.S..
Operationally, pulling oil out of tanks when levels fall below the so-called “suction line” is difficult and expensive, and the quality of crude can be compromised by the presence of water and sediment.
For now, traders are expecting stockpiles to halt their decline by October and possibly start building up again, depending
how exports shape up. Indeed, this week’s drawdown was less than 1 million barrels — the first time that’s happened since early August.
Cushing’s role in global oil markets has also diminished in recent years since the U.S. lifted an export ban. Most barrels now flow straight from the prolific oilfields in Texas’ Permian Basin to the coast, where they are shipped to overseas buyers.
“Cushing can stay at minimum operating operating levels for an extended period of time,” said Scott Shelton, an energy specialist at ICAP. “It’s now a transit point to the U.S. Gulf Coast and a supply point for Cushingbased refiners.”