Cushing, Oklahoma, is a town of about 7,000 close to where we live. What makes it notable is that several oil pipelines cross there. Which has led to the construction of massive oil storage facilities where production companies can park their oil until it’s needed.
The big OPEC producers, led by Saudi Arabia, have made a deal with non-OPEC producers, such as Russia, to cut back production in an attempt to drive up prices. But because Cushing has built up such a big supply, prices are staying low despite the cutback.
Bloomberg has a story about the global economic impact of this small town.
Now if Cushing and thus the world’s oil supply can only avoid damage from the earthquakes they’ve been having. On November 6, Cushing had a 5.3 magnitude quake that did some serious damage to the downtown, though the pipelines and storage tanks were spared.
From Javier Blas and Mark Shenk, OPEC Threatened by Tiny Oklahoma Town With Soaring Supplies – Bloomberg:
For OPEC, there are few enemies more fearsome than the tiny Oklahoma town of Cushing.
With oil inventories at Cushing creeping near an all-time high, U.S. benchmark futures prices are struggling to advance despite the promised production cuts agreed to by OPEC, Russia and other producers. And the storage tanks are likely to stay full as refiners park crude in Oklahoma to lower their tax bills.
Cushing, which prides itself as the “pipeline crossroads of the world,” is the delivery point for the West Texas Intermediate crude contract. With tanks that can hold 77 million barrels of crude, enough to supply France for two months, it’s the biggest storage hub in the U.S. The last high point there came in May. Now, after a brief hiatus, the tanks are filling up once again. For the OPEC-led efforts to boost prices, that’s a major problem. . . .
Stockpiles rose by 1.22 million barrels last week, following a 3.78 million jump the previous week that was the biggest since 2008. The inflows have pushed up stocks to 66.5 million barrels, within a whisker of the all-time record of 68.3 million set in May. With the promise of production cuts sending forward prices up, that’s encouraging traders and refiners to hold onto inventories, the last thing the Organization of Petroleum Exporting Countries wants to see. . . .
With just 7,889 residents, Cushing sits about 70 miles (113 kilometers) northeast of Oklahoma City. Over the years, it’s developed into the key transfer point for oil flowing from West Texas and Canada to refineries in the U.S. Midwest and on the Gulf Coast. Since late October, Cushing inventories have increased by 8.1 million barrels, largely wiping out the 9.9 million drop from mid-May to mid-October.The Cushing overhang is putting pressure on WTI prices, which have given up their gains after last weekend’s historic deal between OPEC and non-OPEC nations. WTI fell on Thursday below $51 a barrel, down from a peak of $54.51 earlier in the week.
[Keep reading. . .]
Photo by Roy Luck, TEPPCO tank farm, Cushing, Oklahoma, Creative Commons License
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