Cushing. This small town in central Oklahoma is the center of the U.S. crude oil universe, with prices at the Cushing hub serving as the reference price for all of the crude produced in the U.S. — and given the role that U.S. oil has assumed on the global stage, one of the most important determinants of global crude oil pricing. Considering the hub’s significance, it’s frequently surprising to industry veterans just how misunderstood Cushing can be. Like, for example, how SHOCKED the world was when Cushing prices dropped below zero back in April. Cushing traders had seen that coming for weeks — the only surprise to them was how far the price plunged that crazy Monday morning. It’s easy to see how something as enigmatic and complex as Cushing might be misunderstood — or underestimated — if you’re not familiar with its history, its inner workings, and its many crucial roles in both the physical and financial crude oil markets. It’s also tempting to think you can get by with only a passing knowledge of Cushing and how it operates. Au contraire! Cushing really matters, and market participants ignore it at their peril. The good news is that there’s finally a combo encyclopedia and user’s manual for “The Pipeline Crossroads of the World.” Today, we examine the hub’s significance to producers, refiners, midstreamers, marketers, and traders, and discuss highlights from RBN’s new Cushing Playbook.
To truly “get” what Cushing is all about, you really need to consider the hub from several perspectives. The simplest to begin with is its physical infrastructure, including:
- The amazing 93 MMbbl of crude oil storage capacity in about 350 aboveground tanks, all sited within less than 10 square miles of the central Oklahoma prairie.
- The arrays of inbound pipelines from Western Canada, the Bakken, the Niobrara, the Permian, and SCOOP/STACK, and outbound pipes to inland refineries and Gulf Coast refineries and export terminals.
- The maze of interconnecting pipes within Cushing, which help to give the hub’s owners and operators degrees of flexibility and optionality unavailable in any other crude oil market center.
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