Petroleum Report: Cushing Inventories Dive

March 20, 2014 04:50 AM
 

 

Crude oil inventories at Cushing, Oklahoma are at their lowest levels since 2012, falling 29% over the past seven weeks. According to EIA, the reduction in stocks there is due to several factors:

  • The startup of TransCanada's Cushing Marketlink pipeline, which is now moving crude from Cushing to the U.S. Gulf Coast.
  • Sustained high crude runs at refineries in Petroleum Administration for Defense Districts (PADD) 2 (Midwest) and 3 (Gulf Coast), which are partially supplied from Cushing.
  • Expanded pipeline infrastructure and railroad shipments that have made it possible for crude oil to bypass Cushing storage and move directly to refining centers in PADDs 1 (East Coast) and 5 (West Coast).twip140319fig2 lg

 

The increased movement of WTI crude oil out of Cushing however has not impacted the national supply which gained on the week and is currently comfortably positioned in the top third of the five-year average. For several years, Cushing has lacked takeaway infrastructure and the addition of new pipeline outlets to the Gulf Coast now make the transit of WTI to export locations more easy.index

Sales from Cushing inventories have been encouraged by market backwardisation -- when the front month contract moves higher than deferred contracts. According to EIA, "Since early January, the WTI 1st-13th price spread increased from less than $6/bbl to $10/bbl on March 19." The increased 'cash-and-carry' price encouraged movement out of storage at Cushing to the global market.

Despite the strong falloff in Cushing inventories, stocks there remain 'well-above' the top of the 2005-'08 average range. If the Obama Administration intends to flood the global market with cheap WTI, improved infrastructure in and out of Cushing coupled with sales-inspiring market forces have paved the way.

Crude Oil --

May 2014 WTI crude oil opened this morning at $99.13 -- $1.03 above the same time last week. Next support is at $97 even and $95.95. A move back above $100.99 would open the door to upside risk to $102.25 and the March high of $104.48.crstuss

U.S. crude inventories gained 5.8 million barrels to 375.9 million barrels -- now just 6.8 million barrels below year-ago.

April 2014 Brent crude oil futures opened at $107.25 -- $1.01 lower on the week. Next support lies at $106.98 and a move below that level would clear the way to bears' target of $103.00. Tough resistance lies at $111.32 and $112.39 along the way to $116.50.

The WTI/Brent crude spread narrowed $2.04 on the week to $8.12 at the open, with Brent at a premium.

Home Heat --

  • Residential heating oil 7 cents lower on the week to $4.12/gallon.
  • Wholesale heating oil 12 cents lower on the week at $3.19/gallon.
  • Residential propane softened another 9 cents to $3.08/gallon.
  • Wholesale propane 6 cents lower to $1.37/gallon.

 

Highway Fuels --

Gasoline firms, highway diesel softens.

"The average U.S. price for regular gasoline was $3.55 per gallon as of March 17, 2014, an increase of four cents from a week ago, but 15 cents less than a year ago. Prices on the West Coast increased by six cents to $3.81 per gallon. Retail gasoline prices in the Midwest and Gulf Coast increased by four and three cents from last week respectively, to $3.57 and $3.28 per gallon. The East Coast price of $3.52 per gallon was up three cents from last week," according to EIA.

"The average U.S. on-highway diesel fuel price decreased to $4.00 per gallon as of March 17, 2014, down two cents from last week, and four cents less than the same time last year. The East Coast, Midwest, and West Coast had prices drop by two cents, to $4.14, $3.99, and $4.02 per gallon respectively. Rocky Mountain and Gulf Coast prices decreased by a penny from last week, to $3.99 and $3.80 per gallon respectively," according to EIA.

Look for information and statistics on LP and Farm Diesel in our weekly 'Farm Fuels in Focus' report.


Graphs and indicated text provided by EIA.

 

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