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United States Oil ETF Message Board

  • lizahuang54321 lizahuang54321 Oct 16, 2013 3:17 PM Flag

    Growing Complexity at Cushing

    When a train laden with crude oil rolled into the sleepy town of Stroud, Oklahoma, one night this August, global oil markets reacted immediately.

    The unexpected arrival of some 70,000 barrels of crude -- a pittance in global terms -- caused the premium of international benchmark Brent oil futures to its U.S. counterpart to widen by a dollar in an hour.

    It was a stark illustration of how finely tuned oil traders are to the ebb and flow of oil through Cushing, the world's biggest storage hub and delivery point for U.S. crude futures, known as West Texas Intermediate (WTI) by the industry.

    While it has always been critical for traders given its role as the delivery point, the focus on Cushing has rarely been greater after an unprecedented three-month drawdown in stockpiles that fueled talk of squeezes on immediate supplies and fears that oil in storage could be drawn to minimal levels.

    As that decline is showing signs of slowing down or reversing, market players and analysts are even more focused on how much oil is stored at Cushing at any given moment. More importantly, they want to know how much of that oil is light sweet that can be delivered against New York's futures contract.

    A shortage of WTI and others oil grades deliverable against the contract can boost prices as the front-month nears expiry as players face being taken to delivery on their positions.

    Yet calculating how much light sweet oil is stored in Cushing has rarely been more difficult to measure, despite the advent of companies using satellites and infra-red cameras to beat government reports.

    The boom in U.S. and Canadian oil production and the race to build out transport options to get it to markets, first to Cushing and then later to the Gulf Coast refining center, has created a tangle of variables to track.

    "It's not a straight forward answer. It is even more difficult at Cushing due to the significant capacity, tanks and number of pipelines involved," said David Auer at refinery consultant

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    • My grandmom used to force me to listen to her Boxcar Willie records when I was a kid.

    • "It's not a straight forward answer. It is even more difficult at Cushing due to the significant capacity, tanks and number of pipelines involved," said David Auer at refinery consultants Turner, Mason & Co.

      "Cushing is such a big place, with so many tanks, that a change in an assumption can make a big difference over all."

      Weekly snapshots of stored oil at Cushing are produced by the U.S. Energy Information Administration (EIA) and the American Petroleum Institute, while energy intelligence group Genscape provides twice weekly data on the hub.

      But getting ahead of that data on a daily basis, or getting intelligence on the kind of crude in storage, is where traders can find a profit or avoid getting squeezed.

 
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