August 13, 2015 – Reuters
Indiana refinery outage escalates fears Cushing will top out
By: Catherine Ngai
Concerns among oil traders are escalating that a combination of surprisingly resilient U.S. shale production and lower autumn refinery demand will cause storage tanks in Cushing, Oklahoma, to fill to the brim with surplus crude as early as October.
The biggest U.S. refinery in the Midwest is suffering through an unexpected outage that may take months to resolve. The shutdown may free up enough crude to top off Cushing in just 2 months, a month earlier than the market expected as recently as last week, sparking a sell-off of oil futures spreads.
Read the full story here: http://www.reuters.com/article/2015/08/13/us-oil-spreads-cushing-idUSKCN0QI0ER20150813
The outage comes at a time when other refineries are preparing planned maintenance, lowering demand across the board.
The anxiety in the market is clear: unwanted barrels at Whiting and without a buyer will almost certainly get redirected to Cushing. Whiting's crude unit can process 240,000 barrels per day. If that entire volume is diverted to Cushing, it would take just 58 days to fill.
Those elements spell trouble for a market readying for another price plunge after a year-long rout lopped off 60 percent of the value of U.S. crude. On Tuesday, U.S. crude futures settled at their lowest value in six years.
"The heavy discounting we see in oil right now suggests there's a lot of pressure from people holding crude to get rid of it - kind of like a fire alarm. It's become a buyer's market," said Sandy Fielden of RBN Energy.
"The outage is adding to the general congestion of oil."
