November futures dropped 0.5 percent in New York after climbing 1.6 percent Wednesday. Gasoline supplies dropped a third week to the lowest level since November 2015, while distillate stockpiles fell by the biggest amount since 2011, according to government data. Crude inventories expanded by 4.59 million barrels last week, more than the 3.9 million-barrel gain projected in a Bloomberg survey. U.S. oil production also rose a second week. “The market focused on the sharp recovery in crude demand implied” by the decline in fuel inventories on Wednesday, said Jens Naervig Pedersen, a senior analyst at Danske Bank A/S in Copenhagen. “It adds to the bullish sentiment buoyed by concerns about the Iran nuclear deal and headlines about OPEC looking at a possible extension of output cuts.” U.S. gasoline stockpiles fell by 2.13 million barrels last week to 216.2 million, the Energy Information Administration reported Wednesday. Distillate inventories, a category that includes diesel, dropped by 5.69 million barrels. Crude output expanded by 157,000 barrels a day to 9.51 million a day. Click Read More below for more of the story.
The latest data from Genscape show that the crude oil inventory at Cushing, Oklahoma, rose by 503,000 barrels between February 19 and February 24, 2016. The API (American Petroleum Institute) reported that the Cushing crude oil inventory rose by 0.31 MMbbls (million barrels) for the week ending February 19, 2016. The EIA (U.S. Energy Information Administration) reported that the Cushing crude oil inventory rose by 333,000 bpd (barrels per day) to 65 MMbbls for the same period.
The Cushing crude oil inventory has risen due to the increase in supply as a result of new pipelines coming online and the increase in storage capacities in response to long-term oversupply concerns. The pipeline infrastructure in this area is the Keystone pipeline owned by TransCanada (TRP). The rise in the Cushing crude oil inventory might boost crude oil and refined products exports. However, the current WTI-Brent spread makes US crude oil exports unviable.
The current Cushing inventory is the highest ever. It’s also 50% more than 2015 levels. Read Which US Regions Affected the Overall EIA Crude Oil Inventory? to learn more about nationwide and regional crude oil inventories. Read How Gasoline Inventory Supported Crude Oil Prices and Did the Distillate Inventory Diverge from Crude Oil Prices? for gasoline and distillate updates.
The consensus of rising Cushing crude oil inventories will put pressure on oil prices and oil producers like Chesapeake Energy (CHK), Devon Energy (DVN), and Pioneer Natural Resources (PXD). However, the increase in supply and the contango market have led to storage opportunities. This benefits oil storage and transportation companies like Williams Companies (WMB), DCP Midstream Partners (DPM), ONEOK (OKE), Spectra Energy (SE), and Kinder Morgan (KMI).
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