Crude oil inventories at Cushing, Oklahoma—the designated delivery point for WTI Crude oil futures contracts—have been falling for the past four weeks, reaching what could be uncomfortably low levels and pointing to a potential further upside for oil prices.
In the latest reporting week to January 28, the U.S. Energy Information Administration (EIA) said that Cushing crude inventories fell to 30.5 million barrels, down by 1.2 million from the previous week. Cushing inventories are now down by 37.3 percent compared to this time of the year in 2021.
Crude inventories dropped from 37.3 million barrels on December 31, 2021, to just over 30 million barrels as of January 28, EIA data showed.
Traders are betting heavily that those levels would further drop when the EIA reports inventories this week, and probably further decline throughout February, Bloomberg Opinion columnist Javier Blas notes.
Shrinking Cushing inventories could push oil prices higher in the coming weeks. Due to operational reasons, crude at Cushing cannot really reach zero, so the perceived “tank bottoms” is when inventories drop below 25 million barrels, Bloomberg’s Blas notes.
It’s not a given that crude inventories at Cushing will reach the so-called “tank bottoms”—upcoming refinery maintenance in the United States could drop the drawdowns.
Nevertheless, low levels of physical crude at the delivery point for WTI Crude oil futures contracts is still a bullish sign for the oil market.
After hitting $92 a barrel on Friday, WTI Crude fell on Monday morning by 1.21% at $91.19 as of 10:25 a.m., and Brent Crude was down 0.53% at $92.83, amid signs of possible progress in the nuclear talks aimed at bringing the United States and Iran back to the so-called Iran nuclear deal.
On Friday, the U.S. Administration restored sanction waivers allowing Iran international cooperation for civil nuclear purposes. This was interpreted as a positive signal from the so-far difficult talks, which, if successful, would lead to the U.S. removing sanctions on Iranian oil exports.
By Tsvetana Paraskova for Oilprice.com
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