“Cushing” Sees Gradual Decline in Crude Storage as Demand Returns, WTI Nearly Reaches $40

The crude stock in Cushing, Oklahoma, U.S., has seen a significant decline in the past four weeks in response to the U.S. production cut in May and the rising oil demand from lockdown easing.

 

Oil prices are expected to rise higher after Brent crude reached $42/bbl and WTI was only a few cents shy of reaching $40/bbl as global markets cheered on the positive sentiment over the decision of OPEC and its allies to extend the production cut of 9.7 million barrel per day for a month, along with the hopes of higher demand as countries are easing their lockdown measures.

 

The most interesting part in the rebound of oil prices in 2020 so far would be the fact that WTI Futures for May once contracted $40.32/bbl a day before the maturity date after contract holders were waiting for the last moment in hopes of recovery in oil prices which did not happen. Brent crude also took the hit, though not as hard as WTI.

On the day of historical contraction in oil price history, the crude storage’s main hub at the City of Cushing in the State of Oklahoma, U.S., reached 55 million barrels from the working capacity of 76 million barrels. The report of gushing crude oil caused negative sentiment to the market and reflected how much oversupply the U.S. crude was.

After the incident, OPEC and its allies agreed to output cuts, starting in May, and would gradually lower their cuts as time went on.

 

However, the latest report from the U.S. Energy Information Administration (EIA) stated that the oil storage at Cushing has been declining for the fourth week to record at 51 million barrels in the last week of May, compared to a record of 65 million barrels in the first week of May.

Thus, the development in Cushing’s storage might be able to reflect and predict the movement of U.S. crude for the time to come, while on the Brent side, the price also has positive sentiment from OPEC oil cuts. More importantly, the U.S. agreed in May for a 1.7 million barrel oil cut to curb the plummeting oil price at the time.