(July 29, 2014 – WSJ “Money Beat”) Cushing Oil Supplies Squeeze Market
U.S. oil production is booming. But for physical traders, there isn’t enough oil in the one place that it matters: Cushing, Okla.
Storage supplies in Cushing, the physical delivery point for the benchmark New York Mercantile Exchange contract, have plummeted from 41.8 million barrels in late January to 18.8 million barrels, the lowest level since 2008, thanks to new pipeline capacity.
London-based consulting firm Energy Aspects says 18 million barrels is Cushing’s operational minimum, or the least amount needed in storage for oil to be easily pumped out.
The Nymex contract for September delivery of West Texas Intermediate, the benchmark crude at Cushing, settled at $1.24 a barrel more than the October contract, indicating traders are willing to pay a hefty premium to guarantee short-term supplies.
“It’s clear that there’s upward pressure on WTI,” says Sandy Fielden, an analyst at consulting firm RBN Energy in Houston. “The further the stocks at Cushing go down, the more there’s going to be demand for WTI.”
Read the full story here: http://blogs.wsj.com/moneybeat/2014/07/29/cushing-oil-supplies-squeeze-m...
