Oil exports from the United States are increasing, pushing fuel away from storage hubs

Following Russia’s invasion of Ukraine, US oil exports have increased, and barrels of domestic oil that would normally go to the Cushing, Oklahoma, storage center are now being shipped via the Gulf Coast, dealers said. The invasion shook the oil market, as firms stopped buying Russian oil, causing prices to rise. Worldwide customers are hunting for petroleum wherever they can find it, and shipments from the United States, the world’s top crude exporter, have increased in recent weeks.

Cushing, Oklahoma, informally known as the oil industry’s crossroads, is where holders of U.S. West Texas Intermediate futures contracts accept delivery. Because of its large storage capacity, it is still regarded as a guidepost for US stocks, even though barrels have relocated to the Gulf after Washington repealed the US export prohibition in 2015. According to U.S. Energy Department statistics, oil exports from the United States increased to 3.8 million barrels per day for the week ending March 18, the highest level since July 20, 2021. Cushing stocks are presently at 25.2 million barrels, just shy of a four-year low set in early March.

According to Ryan Saxton, head of oil statistics at research company Wood Mackenzie, when Cushing stockpiles dip so low, the price for crude oil supplied at Midland, Texas, trades at a discount to Cushing in order to draw barrels into the storage hub. However, this has not occurred. Midland crude currently trades at a 70-cent premium to Cushing barrels.”It demonstrates how much demand there is for Midland barrels,” said one dealer located in the United States. “The draw is to the Gulf Coast of the United States, so there’s no need to travel to Cushing.”

United States oil is appealing to foreign buyers because it is trading at a sharp discount of about $7 to the global benchmark Brent. Earlier this month, that margin touched $9.20, the widest discount in over two years. Worldwide demand has virtually recovered to pre-pandemic levels, but supply has been hampered since the Organization of Petroleum Exporting Countries (OPEC) has been hesitant to restore supply curbs enforced during the pandemic in 2020. Furthermore, Russian supplies might drop by 2 to 3 million barrels per day.

Low storage levels are also a problem in Canada, the world’s fourth-largest oil producer. According to Dylan White, senior research analyst for oil markets at Wood Mackenzie, storage stocks at monitored locations in Western Canada were within 3 million barrels of the record-low utilization achieved in 2017 at 30.3 percent. According to him, that amount represents the functioning floor for storage facilities. The next oil refinery maintenance, which usually takes place in the spring, might increase storage in both Canada and the United States, though balances should remain tight, according to Bank of America analysts.