Cushing Crude Stockpiles Drop for First Time in 21 WeeksMark Shenk
The danger the U.S. would run out of space at its crude storage hub receded as inventories at Cushing, Oklahoma, declined for the first time since November.
Stockpiles at Cushing, the delivery point for crude traded in New York, slipped 514,000 barrels to 61.7 million last week, the Energy Information Administration said Wednesday. That restrains the march toward maximum capacity -- or reaching “tank tops” -- highlighted earlier this year by banks from Bank of America Corp. to Citigroup Inc. and Goldman Sachs Group Inc.
“The market is telling us that the Cushing inventory drop is a big deal,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion, said by phone Wednesday. “The super-bearish case was built on concern that we would run out of space at Cushing, and now it looks like we dodged that bullet.”
Oil prices surged to a four-month high in New York after the report, extending their rebound from the six-year low reached last month amid concern that excess crude supply would fill storage tanks close to capacity. Ed Morse, Citigroup Inc.’s global head of commodity research, said in a February report that prices may drop as Cushing supplies were “heading toward tank tops.”
“The fears over reaching storage capacity have receded today,” Patricia Mohr, Bank of Nova Scotia Commodity Market Specialist in Toronto, said by phone Wednesday.
Cushing supplies reached a record 62.2 million barrels as of April 17. The hub has a working capacity of 70.8 million, according to the EIA. The decline followed 20 weeks of advances, the longest stretch since the EIA began tracking supplies at the hub in 2004.
Nationwide stockpiles rose 1.91 million barrels to 490.9 million barrels last week, the highest level in weekly EIA data that started in August 1982. Supplies haven’t been this high since 1930, according to monthly records dating back to 1920.
“There’s been a consensus that Cushing would soon be overflowing,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone Wednesday. “There’s going to be a recognition that refineries are at high rates, resulting in demand for a terrific amount of oil.”
Refineries operated at 91.3 percent of their capacity, up from 91.2 percent the previous week.
Crude production rose by 7,000 barrels a day to 9.373 million, the first gain in three weeks. The number of drilling rigs targeting oil decreased to 703 last week, the fewest since October 2010, according to data from Baker Hughes Inc., an oil-services company. The rig count has declined by more than half since December.
WTI crude for June delivery slipped 6 cents to $58.53 a barrel at 9:46 a.m. on the New York Mercantile Exchange. Futures earlier touched $59.40, the highest intraday level since Dec. 12.