The U.S. Energy Information Administration said on Thursday it was reviewing the results of a pilot study to better understand minimum working crude oil inventory for some storage hubs at Cushing, Oklahoma, after stocks reached levels that may constrain normal operations.
Cushing, the delivery point for U.S. West Texas Intermediate (WTI) crude futures, is one of the world’s largest oil storage hubs. Stock levels at the site are closely watched because they directly influence WTI prices and provide a key measure of the U.S. oil market’s supply-demand balance.
Stocks at the hub have fallen sharply since the Iran war disrupted oil flows through the Strait of Hormuz, forcing buyers to draw more heavily on U.S. crude supplies.
* According to the EIA’s Weekly Petroleum Status Report, inventories remained below 20 million barrels from the week ended June 19 through the week ended July 10.
* As stocks at Cushing slipped below 20 million barrels in mid-June, WTI briefly traded at a premium to global benchmark Brent crude, an uncommon market structure that reflected exceptionally tight U.S. crude supply.
* The EIA said storage terminals require a minimum volume of crude, known as “tank bottoms,” to keep pumps and pipelines operating.
* Once inventories approach those levels, some oil becomes effectively inaccessible even though storage tanks are not technically empty.
* The EIA said the strength in WTI prices indicates that recent low inventory levels may be near tank bottom levels.
(Reporting by Arunima Kumar in Bengaluru; Editing by Leroy Leo)