Supply concerns continue to drive oil prices higher

Its hundreds of tanks are tied to pipelines that supply US mid-continent and southern refineries, and funnel oil to Gulf Coast export ports. These fell another 800,000 barrels to a 14-month low, just under 23 million barrels. Why is this important? Cushing has a storage capacity of just under 100 million barrels. Storage capacity is at 24%. If storage falls below 20% of capacity, roughly below 20 million barrels, it can cause operational issues. If the level is too low, crude can get sludgy, and you cannot get it out, or whatever comes out is unusable.

The American Petroleum Institute

The oil market is being influenced by the latest data from the American Petroleum Institute (API). The data has helped to keep the price of West Texas Intermediate (WTI) crude oil above $90. The API figures showed an unexpected increase of 1.6 million barrels in crude inventories, while gasoline inventories fell by 70,000 barrels and distillate inventories fell by 1.7 million barrels.

The WTI price chart

One area of the market that has caught the attention of traders is the US crude oil share price chart, specifically the WTI price chart. The share price has been rising for two consecutive days, which is a positive sign for oil prices. The level of stockpiles at the Cushing storage hub in Oklahoma is particularly important. Cushing collects barrels from top US shale fields and Canada and supplies pipelines to US mid-continent and southern refineries, as well as transporting oil to Gulf Coast ports.

Cushing's storage capacity

Recently, the stockpiles at Cushing decreased by 800,000 barrels, reaching a 14-month low of just under 23 million barrels. This is significant because Cushing's storage capacity is around 100 million barrels. With the stockpiles now at 24% of capacity, if storage falls below 20 million barrels, it could lead to operational issues. When storage falls below this level, it stirs up the sludge at the bottom of the tanks, which makes it difficult to remove and unusable.

Since we are approaching the bottom limit of storage capacity at Cushing, it is clear that oil prices are increasing. This situation creates a sense of scarcity, which could potentially cause oil prices to rise even further. It's like we are "scraping the bottom of the barrel," indicating that oil is becoming scarce and valuable.