EIA Suggests Just 16M Barrels of Space Left at Cushing

by TheTradesLessTaken
imageCommodities11 hours ago (Apr 22, 2020 05:50PM ET)

(C) Reuters.

By Barani Krishnan

Investing.com – The U.S. Energy Information Administration is suggesting there is notional space for just another 16 million barrels at the country’s storage hub for crude oil in Cushing, Okla., and that this could fill up by next week based on the average build trends seen this month.

In its “This Week in Petroleum” blog, the EIA said the Cushing hub had a working capacity of 76 million barrels. Some data had suggested that the capacity was as large as 90 million.

In its separate weekly supply-demand report for oil released earlier on Wednesday, the agency said Cushing stockpiles rose by around 5 million barrels last week to reach almost 60 million barrels. Based on that number and the capacity figure given by the EIA, there is room for just 16 million barrels.

Data released by the EIA over the past four weeks showed U.S. crude inventories as a whole have grown by a cumulative 65 million barrels. That averages a growth of 16.25 million barrels per week. If all that oil came to Cushing, the hub could fill up by next week.

“The availability of storage in Cushing will remain an issue in the coming weeks, however, and could still result in volatile price movements in the June WTI futures contract or other U.S. crude oil spot prices that face limited storage options,” the EIA said, adding that it “will continue to monitor these market developments.”

May, the expiring front-month contract in US West Texas Intermediate crude, fell to minus $37.63 per barrel on Monday — setting the first negative pricing in the commodity’s 37-year trading history — as no buyers turned up for prompt delivery of oil in a market glutted by the coronavirus pandemic.

June, the new front-month for WTI, settled up 19% at $13.78 per barrel in its first trading day on Wednesday.

Despite the market’s rebound, fears remain that the country will run out of space soon to store oil.

The EIA underscored the point on Wednesday by saying that some of the existing space at Cushing may have already been leased out — affirming a Reuters report from Tuesday.

“Although Cushing has physically unfilled storage available, some of this physically unfilled storage is likely to have already been leased or otherwise committed, limiting the uncommitted storage available for contract holders without pre-existing arrangements. In this case, these contract holders would likely have to pay much higher rates to storage operators that have uncommitted space available,” the EIA said. “Taken together, these factors suggest that the phenomenon of negative WTI prices could be confined to the financial market, with few physical market participants paying negative prices.”

Aside from demand destruction, U.S .crude prices could also turn negative due to another reason: higher-than-necessary production. The EIA reported on Wednesday that oil output in the country stood at a relatively high 12.2 million barrels per day last week, just 100,000 barrels less than the previous week.

EIA Suggests Just 16M Barrels of Space Left at Cushing

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