Traders say that whatever storage space is left at the Cushing oil hub is spoken for by firms sending oil to the hub right now. Yet according to official US government data, storage at the key crude oil hub in Cushing, Oklahoma, was just 70 per cent full as of mid-April.
The current US oil contract fell into negative territory this week due to millions of barrels of supply around the globe hitting markets at a time when the coronavirus pandemic means people are not using it.
With global demand down 30 per cent, that leaves buyers of oil few options other than to stick crude in storage, and Cushing is the primary US hub for that.
Cushing tank farm has about 76 million barrels of working capacity, and coming into last week about 53 million barrels were being stored there, according to US Energy Department figures.
New tank leases at Cushing have ground to a halt, blocking anyone trying to buy up last-minute space, five trade sources said. The chances of finding unused space there now do not look good.
Ernie Barsamian, Chief Executive Officer of The Tank Tiger, a terminal storage clearinghouse in Princeton, New Jersey, said: “The terminals have already contracted their storage 100%. There may be contracts coming up in the next few months that will either be renewed or put out to market.”
Phil Verleger, an oil economist and independent consultant, added: “Firms have oil on pipelines on the way to Cushing and thought they had storage tied up and for some reason they didn’t.”
Trade sources, citing Genscape data released on Monday, said that 61 million barrels of crude are now being kept in Cushing. That leaves about 15 million barrels of space left.
John Coleman, principal analyst at Wood Mackenzie, said: “We have been forecasting for some weeks that Cushing, Oklahoma would reach tank tops by mid-to-late May. Based on current trajectories, (that) looks to likely to happen in the first half of May instead.”
Oil companies, including Magellan Midstream Partners, Enterprise Products Partners, and Enbridge inc own tanks at the hub, which they lease out for companies to store their oil. Some traders sublease that space. Barsamian, who brokers these transactions, said all tanks were leased by mid-March, and he has not subleased any space since then.
That came as a shock to those who had jumped into the oil contract, only to find they would not be able to store it anywhere if they still held the position on expiry, unleashing a flood of selling.
Flows into Cushing have accelerated in the last two weeks after Enterprise Products Partners started shipping on unused pipeline space from the US Gulf Coast to Cushing.
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