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US Demand For Oil Surges, Reserves Getting Depleted
US demand for oil intensified this month as the economy is now coming to life. Consequently, crude oil tanks in Cushing, Oklahoma are running out of reserves. Unfortunately, current high prices of oil contracts are going to help keep reserves low.
RELATED: Crude Oil Prices Go Down As COVID Fears Return
US Demand for Oil Surges
With the economy reaching pre-pandemic activity, US demand for oil is surging. In addition, the demand from other countries is also surging.
This means some nations are actively seeking to purchase crude oil from the United States. In both cases, oil stocks in Cushing and other hubs are getting cleaned out.
In particular, the Cushing facility used to be the largest and most significant storage hub for US oil. With activity shifting to the Gulf states, Cushing is less important now, especially since the US exports around 3 million barrels a day.
While the drain on US oil inventories, analysts are quick to point out that this is a short-term issue. This can also inflate US crude oil prices, which are already 25% higher than the last two months.
However, the difference between West Texas Intermediate and the Brent international standard should remain slim. “Storage at Cushing alone has the potential to really rally the market to the moon,” according to Bob Yawger, director of energy futures at Mizuho.
Stockpiles Down to 27.2 Million Barrels
The stockpile in Cushing is now down to 27.3 million barrels. This is the lowest level since October 2018, according to the Energy Information Administration. In comparison, stocks were almost double that in 2020.
Meanwhile, Gulf inventories are at 247 million barrels as of last week. Exactly two years ago, there were 224 million barrels in inventory.
As US demand for oil kept going up, Cushing stocks were the first to go. Domestic refiners tried to keep local crude at home to provide fuel such as gasoline and distillates to American consumers.
This is according to Reid I'Anson, the senior commodity analyst at Kepler. Also, US oil production slowed down compared to 2020 rates.
By 2019, the US produced around 13 million barrels of oil per day (BPD). However, recent weeks saw production slow down to less than 11.5 million BPD. Refinery production also decreased by 1%.
Spread Between Brent and WTI Narrowing
As inventories declined while US demand for oil increases, the spread between WTI crude and Brent keeps getting smaller. From $4.47 earlier his October, the gap is now around $1.09 a barrel.
In an additional sign of high short-term demand for US crude, the WTI’s premium for delivery this December versus December 2022 reached a high this week of $12.48 per barrel. This is the most since at least 2014, according to Refinitiv.
By the end of the year, analysts expect US crude production to jump to 500,000 to 600,000 barrels per day. This would outpace production gains of 300,000-400,000 BPD.
In turn, this will keep the spread between the two benchmarks narrow. “Only if OPEC (the Organization of the Petroleum Exporting Countries) intervenes with more supply of crude or if COVID rears its ugly head again, curbing demand, this high volatility will come off,” said Mukesh Sahdev.
He is the senior vice president and head of downstream at Rystad Energy.
Watch the Arirang News video reporting that crude oil prices climb to 7-year highs on expectations global supplies will remain tight:
Loading ...What do you think of decreasing stocks of crude oil in the country? Is this a good thing or the opposite? Let us know what you think. Share your thoughts below.
5 Comments
Im sorry people but we as a country new to get back to reality and need to start making are own country strong again by making are own products for ourselves not buying everything over seas yes we do need to buy some resource’s from other country’s but we need to go back to the older days where we made things here for us and to trade we are running ourselves into the ground and why because the government is not thinking of us as one but as for there selves we our to be one nation under GOD eyes and its not that way anymore as I see it its one nation under governments eyes what happen to we the people that makes this nation I don’t understand us or the government anymore we fell so far backwards its a shame to our for fathers that made this nation so please let us rise again to the place we once was and better yet go beyond that and show other nation who we really are
This is exactly the results of allowing a (fraud elected) administration of socialist communist dictators. They will do anything to put money in their own pockets all the while draining the life out of the CITIZENS. Just look around and it is quite evident that we are being dragged down to be slaves to the ELITE RULING, MONEY HUNGRY, CONTROL DICTATORS.
One way we could combat the Extremely over priced gas/diesel fuel, is to start bicycling. Don’t try and tell me that you can’t. For when I was a student at CSUS, in Sacramento Calif. I bicycled at least 50 miles a day. I lived in Orangevale Calif. and I’d bike the first 5 miles on Hazel Ave. then I’d get onto the American River Bicycle trail. The distance to school was 21.5 miles–that is EACH WAY. The comical point is that I’d get to school faster on the bicycle than when I drove my truck. My average time to school driving my truck was an one hour and forty five minutes. My average time to school bicycling was one hour and fifteen minutes. My record time was One hours eight minutes and fifteen seconds. With a top speed of 45.3 mph, and an average of 19.6 mph. There was a ten mile stretch where I never got below 25 mph. What we need is to increase the number of bicycle trails in Calif. and the USA. There was one week where I put on 200 miles going to school on my bicycle. Granted on the rainy weather days I drove my truck. If we got rid of the F–king Joke of a president Biden that got into office by dishonorable means and got Trump back, that FOUGHT FOR THE US CITIZENS OF THE USA, the American Citizens first are prices of fuel would start coming back down as a start. Bring back all of our work that we used to do. We used to grow our own cotton, wool, sheep for lamb chops, and everything else. Like back in the 40’s 50’s, and 60’s. I don’t have a problem helping other countries but we should be helping our USA citizens FIRST! Today, 70+ % of the USA Population is over weight. Collectively speaking get your/our asses on the bicycles and start loosing weight. Never minding the improving of your overall health. Get rid of abolish cigarettes’, I could go on and on with with ways to improve our nation. But~~~~~.
this is s cyclical business but the supply chain crisis was partially caused by all the free govt. handouts and union exploitation. What would really help our country is if we would allow for new oil refineries to be built that can handle all the new high quality crude we now produce in this country. That way we won’t be as dependent on foreign crude to run through our existing refineries that require the heavy, high sulfur crude. Right now, the majority of our high quality crude is exported to other countries because our existing refineries are not designed to handle it. The crude oil market is too backwardated and Cushing can’t afford to store crude for too long. Best to sell it now while prices are much better than in the future. Our country NEEDS crude oil and Nat Gas now and for many decades from now. Stop penalizing the oil/gas companies and work WITH them.
I don’t believe any of it why is it when trump was in office gas and oil was low and under control all you idiots who voted dumbacrat did not learn a damn thing did you