The oil storage tanks located in Cushing in Oklahoma are now edging near the critical limits and this is really a cause of worry for the oil industry in the U.S.
The New York Mercantile Exchange, crude oil contract’s delivery point is Cushing. This is where about 13% of the United States oil storage is and it has a storage capacity of 73.014 million barrels of oil. But, the storage levels are dipping in Cushing as the days go by and the last recorded level on January 29 suggests that there are just 64.174 million barrels of oil stock. This means that the storage capacity is just 88% full.
The Nymex terminal complex where they keep tag of the inventories feels that the storage is already at a critical lower side. Only 6 out of the 7 barrels at the Nymex hub are filled with crude oil now. If you have plans to invest in oil stocks, then it is better to Read This Article about Investing in the US – Tips for Beginners by clicking on the link.
Cushing in Oklahoma is a blending station where the mid-continent’s crude oil is mixed to get the specified grades that are needed by different refineries. There is every possibility of a situation raising the country wherein there will be so much of oil, but the country will not be having the right kind of oil. Also, building tanks to store the excess oil will take a lot of time and also it would cost a lot of money. There would also be debates on who would be funding for building the tanks.
At present, there is excess of crude oil in the U.S. that is coming from the domestic production, from Canada by rail and through the storage at the Gulf Coast. As the crude oil volumes go up, it could be difficult for the local pipelines to consume these huge volumes.
The macro strategist at Seaport Global Securities, Richard Hastings, said that he does not feel that the Cushing storage capacity will not reach its maximum storage capacity as the crude oil will be back up in the Midwest area and particularly the Gulf Coast.
The problems in the Cushing storage capacity will make the Gulf Coast crude oil volumes to be at higher levels. This will mean that the price of the crude oil has to be altered and this is a problem that all the global benchmarks will witness in the near future.
There was a prediction by certain market analysts that the U.S. will be running short of crude oil storage spaces in the near future. It looks like this prediction has come true. They even predicted that the prices of the crude oil will touch new lower levels of $30 a barrel. Even this has come true. The storage dearth is one of the reasons for the crude oil prices to drop to $30 a barrel.
The WTI oil futures closed at just $29.69 a barrel this Monday. These are alarming signs for the crude oil industry and without proper storage facilities one can see the prices drop even further.