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U.S. oil exports skyrocket, pulling crude oil away from storage hubs

Stephanie Kelly, Arathy Somasekhar, Nia Williams

New York (Reuters)-After Russia’s invasion of Ukraine, U.S. oil exports have increased, and barrels of domestic oil, usually heading to a storage hub in Cushing, Oklahoma, are being exported via the Gulf instead, traders said. Stated.

The aggression disrupted the oil market as companies stopped buying Russian oil and prices soared. Buyers around the world are trying to procure as much crude oil as possible. Over the last few weeks, exports from the United States, the world’s largest producer of crude oil, have increased.

Colloquially known as the crossroads of the oil industry, Cushing, Oklahoma is where holders of US West Texas intermediate futures contracts make deliveries. Its enormous storage capacity means that it is still considered a guide to US inventory even after the barrel has moved to the Gulf. Washington lifted the US export ban in 2015.

US crude oil exports rose to 3.8 million barrels per day on March 18, the highest since July 2021.

Ryan Saxton, head of oil data at research firm Wood Mackenzie, said that when Cushing’s stockpile is so low, the price of crude oil delivered in Midland, Texas is usually to attract barrels to the storage hub. He said it would be traded at a discounted price.

But that’s not happening. Midland crude is traded at a premium of 70 cents against Cushing barrels.

A US-based trader said, “It shows how much the Midland barrel is being pulled. You don’t have to go to Cushing because you’re pulling in the US Gulf.”

US crude is attractive to global buyers as it trades at a significant discount of nearly $ 7 under the global benchmark Brent.

Global demand has risen to pre-pandemic levels, but supply has been hampered by the Organization of Petroleum Exporting Countries (OPEC) lagging behind the recovery of supply cuts enacted during the 2020 pandemic. .. Also, Russia’s supply could decline by two. Up to 3 million barrels a day.

Even in Canada, the world’s fourth-largest producer of crude oil, low storage levels are a problem. Storage levels in the monitored areas of western Canada remained within the record low utilization of 3 million barrels set at 30.3% in 2017. Wood Mackenzie oil market analyst. He said that number is a marker on the operational floor of the storage facility.

According to Bank of America analysts, future oil refinery maintenance will usually take place in the spring, which could lead to higher storage in both Canada and the United States, but the balance should remain tight.

Graphics: Rising oil and Cushing hub prices for export demand: https: //fingfx.thomsonreuters.com/gfx/ce/gdpzyjdqavw/Pasted%20image%201648238249462.png

(Report by Stephanie Kelly in New York, Arathy Somasekhar in Houston, Nia Williams in Calgary, edited by David Gregorio)

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