Cushing, the home of the “black gold rush” and the world’s largest oil storage hub, is shrinking its oil stocks again as demand seems to continue until 2021.
In November, reports suggested that oil was again stored in Cushing, Oklahoma. Commercial stocks rose to 61.1 million barrels in mid-November, once again reaching April levels; when oil faced the lowest demand. This figure was over 1 million more than the previous week and 39.3 percent higher than in the same week in 2019.
However, by the end of November, the outlook was clearer as demand began to grow. Stocks fell to about 60 million barrels, returning to normal levels. This reflects the gradual consolidation of the market until the pre-Covid period, as optimism about the vaccine and the new year increases demand.
Cushing is the gateway between Oklahoma and Texas, a major oil route. However, it has suffered a tough year, as West Texas Intermediate (WTI) crude oil futures fell below zero in April this year. However, Paul Horsnell, head of commodity research at Standard Chartered in London highlights Cushing’s resistance In the face of a global energy crisis, “markets were under extreme stress and prices and demand were falling very rapidly. The numbers in Cushing looked pretty horrible – but Cushing didn’t fail. “.
Being an important pipeline intersection in the American oil region, the storage facilities and pipelines in the city of only 7,000 inhabitants occupy hundreds of acres. The industry in this area is dominated by just a handful of billion-dollar power companies. For this reason, Cushing varies from predictors of oil prices on the stock market, relying on the future of its physical oil stock, to export worldwide.
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Finally, companies are regaining interest in longer futures contracts for the first time since the beginning of the year. At the end of November, West Texas Intermediate concluded its contract in December 2021 at a premium for futures in December 2022.
It seems that this desire to invest again in Cushing is paid off, as did the future gross WTI rose from $ 41.74 at $ 49.02 a barrel between 18of November 18of December. In terms of export figures, European refineries imported the company’s crude oil at a higher rate 400,000 bpd year to date. This could be made even more interesting by the proposal WTI inclusion as part of the Brent “Benchmark”.
In general, the US is beginning to see a greater stimulus in its energy sector, such as oil prices reached a maximum of 9 months this month. Like WTI, Brent Crude took advantage from this increase in demand, from $ 44.2 to $ 52.2 a barrel in the last month.
Demand for imports is growing, especially from China and India, as the Asian energy sector appears to be recovering rapidly from the pandemic. Additional restrictions in North America and Europe mean uncertainty about demand. However, experts hope that a steady increase in demand for oil will enter the new year.
A sector that was hit hard in 2020, with Cushing at the center of the controversy, is slowly beginning to recover. With rising oil demand and a gradual rise in price per barrel, US energy companies seem confident, with Cushing back in the center.
By Felicity Bradstock for Oilprice.com
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