Cushing, the cradle of the ‘black gold rush’ and the world’s largest onshore oil storage hub, is once again reducing its oil supplies as an increase in demand appears to continue in 2021.
In November, reports suggested oil was again stockpiling in Cushing, Oklahoma. Commercial stocks rose to 61.1 million barrels in mid-November, returned to April levels; when oil had the lowest demand. This number was over 1 million more than the week before and 39.3 percent higher than in the same week in 2019.
However, the outlook was more favorable at the end of November as demand started to increase. Inventories fell to about 60 million barrels, back to normal levels. This reflects the gradual strengthening of the market up to the pre-Covid period, as optimism about the vaccine and the new year drive up demand.
Cushing is the gateway between Oklahoma and Texas, a major oil route. Still, it has had a difficult year as West Texas Intermediate (WTI) light sweet crude futures fell below zero in April this year. Paul Horsnell, head of commodities research at Standard Chartered in London emphasizes Cushing’s resilience In the face of a global energy crisis: “The markets were under extreme pressure and prices and demand fell very quickly. The numbers in Cushing looked pretty dire, but Cushing didn’t fail. ”.
As a major pipeline crossroads in the US oil region, storage facilities and pipelines in the city of just 7,000 residents occupy hundreds of acres. The industry in this area is dominated by only a handful of energy companies worth billions of dollars. For this reason, Cushing ranges from forecasters of the stock market’s oil price, betting on the future of his physical oil supply, to exports around the world.
Related: Goldman Goes Bullish on Oil: Sees $ 65 Brent in 2021
Finally, for the first time since the beginning of the year, companies are regaining interest in longer term contracts. End of November West Texas Intermediate has arranged its December 2021 contract at a premium to futures in December 2022.
It seems this eagerness to reinvest in Cushing is paying off, as the WTI crude oil futures have increased from $ 41.74 to $ 49.02 a barrel between 18th November and 18th December. In terms of export figures, European refineries have imported the company’s crude oil at a higher rate 400,000 bpd since the beginning of the year. This could be made even more interesting by the proposed inclusion of WTI as part of the Brent “Benchmark”.
Overall, the US is starting to see more stimulus in its energy sector, such as oil prices peaked in 9 months this month. As well as WTI, Brent Crude has benefited of this increase in demand, it increased from $ 44.2 to $ 52.2 a barrel in the past month.
Demand for imports is picking up, especially from China and India, as the energy sector in Asia appears to be recovering rapidly after the pandemic. Further restrictions in North America and Europe mean uncertainty about demand. However, experts are hopeful of a continued increase in oil demand in the new year.
An industry hit hard in 2020, with Cushing at the center of controversy, is slowly starting to recover. With the demand for oil increasing and the price per barrel gradually rising, the US energy companies look confident, with Cushing taking center stage again.
By Felicity Bradstock for Oilprice.com
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