US crude oil stocks at the Cushing, Okla., terminal fell below 20 million barrels last week for the first time in eight years, per EIA data released Wednesday, raising concerns about the tightness of the crude market.
Stores of crude oil at Cushing fell to 18.96 million barrels in the week ended June 19, the EIA said Wednesday, marking the lowest level on record since October 2014 — the peak of the US shale boom as hydraulic fracturing technology transformed Texas’s Permian Basin.
The amount of oil stored at Cushing is critical because that terminal is where NYMEX contracts on US West Texas Intermediate are priced. Because NYMEX contracts represent physical deliveries, tightness in Cushing stocks puts upward pressure on WTI prices as traders evaluate how much oil is available to fulfill those contracts.
“If you own a contract of WTI on expiration, you receive 1,000 barrels of West Texas Intermediate Crude oil from the country’s largest storage facility at Cushing, Oklahoma,” Mizuho director of energy futures Robert Yawger said Wednesday. “If the tanks run dry, that is going to be tough to perform on.”
There are also concerns about operational failures. Much of the oil at Cushing is stored in floating-lid storage tanks, where the lid rises and falls as oil is pumped in and out. Below 20 million barrels, Cushing stores risk breaching contingency stock guarantees for unplanned outages, compromising tank pressure levels, and raising questions about the remaining oil, per Sparta Commodities’ June Goh.
In the wake of the signing of the US-Iran memorandum of understanding to end the war and reopen the Strait of Hormuz, contracts on West Texas Intermediate crude, the US benchmark, fell as much as 4.4% on Wednesday to trade below $70 per barrel.
