According to the US Energy Information Administration, crude oil inventories at Cushing, Okla., the primary crude oil storage location in the US, decreased 13 million bbl (-32%) over the last 2 months.
“On Mar. 21, Cushing inventories were less than 29 million bbl, more than 20 million bbl lower than a year ago and the lowest level since early 2012,” EIA said, attributing the dramatic decline of Cushing storage to three factors.
First, the startup of TransCanada’s Cushing Marketlink pipeline, which is now moving crude oil from Cushing to the Gulf Coast. Second, the sustained high crude oil runs at refineries in Petroleum Administration for Defense Districts (PADD) 2 (Midwest) and PADD 3 (Gulf Coast), which are partially supplied from Cushing. And third, expanded pipeline infrastructure and railroad shipments that have made it possible for crude oil to bypass Cushing storage and move directly to refining centers in PADD 1 (East Coast), PADD 3 (Gulf Coast), and PADD 5 (West Coast).
Despite the considerable drawdown, Cushing inventories remain above the top of the 2005-08 range. Over the last several years, crude oil stocks at Cushing rose because of rapidly growing deliveries from tight oil formations in the Midcontinent and insufficient takeaway.
“Currently, Cushing inventories have fallen to levels that reflect current market conditions, and although they are reduced, the levels remain consistent with crude oil supply requirements to meet regional refinery demand,” EIA concluded.