It appears that we are entering one of the most volatile periods in oil trading history. Speculators are taking advantage of the situation by buying and holding oil, then waiting for prices to escalate. We hear over and over that this is causing a huge buildup of oil at the US’s largest storage terminal in Cushing Oklahoma. A new chart from the EIA seems to indicate that the “crisis” is not that new, and that the number of barrels stored at Cushing is sort of irrelevant. There is now more oil at the Oklahoma hub than ever before in it’s history, but there’s also more to the story than the number of barrels.
Of course a backup at Cushing could further depress prices, but it’s the utilization rate of all of the combined tanks there that we should look at, not just the number barrels stored there. Current utilization at Cushing is at 77%. Previously utilization at Cushing Oklahoma was up to 90% in Jan 2011 and 80% in Jan of 2013. Also, it seems that spring supply builds are somewhat of a normal occurrence, as oil refineries reconfigure their equipment and switch from winter to summer blends of gasoline.
The world is using more oil now, so saying there’s more oil than ever in storage hubs like Cushing does not tell the whole story.
According to the EIA the US is using 19.4 million barrels of oil per day. Total storage at Cushing Oklahoma is only 54.4 million barrels, or only a 2.8 day supply. That’s right, Cushing Oklahoma doesn’t even hold three days worth of oil for the thirsty USA. There’s plenty of storage outside of Cushing, including tank farms across the nation as well as tankers idled offshore, and overall storage levels are indeed high. As for the huge glut of oil in Oklahoma, it simply isn’t as big a deal as the media is making it out to be.