Here’s an excerpt from a story that ran at World Oil Magazine on Friday:
The storage tanks in Cushing, Oklahoma, require a minimum level of oil to maintain normal operations, which traders generally believe is around 20 million barrels. Unusually for this time of year, stockpiles declined more than 4 million barrels over the past two weeks to 31 million and are expected to keep dropping rapidly due to the world’s insatiable demand for U.S. light sweet crude.
It’s a stunning reversal from last year when the pandemic prompted a glut of oil so big that traders resorted to storing it in tankers at sea. The drawdown, driven by a rapid demand recovery, has been exacerbated by an energy crisis that has sent European and Asian buyers on the hunt for cheaper barrels. Over the coming weeks, stockpiles are likely to fall further to the operational low, traders at some of the biggest oil merchants in the world said, prompting the market to turn even more bullish.
“Crude oil could justifiably trade to the next level higher on the storage drought at Cushing alone,” said Bob Yawger, director of the futures division at Mizuho Securities USA. “Forget about fuel switching, whether OPEC+ adds additional barrels, or dollar weakness: if Cushing continues to slide, it could get ugly quickly.”
The rapid depletion of Cushing signals just how tight global oil supplies are and threatens to drive prices even higher from their current levels. Surging oil prices are already driving costs up for road fuel, freight activity and air travel and stoking inflation just as many countries are only just recovering from the pandemic-driven economic slump.
Hey, you know what would have helped to prevent any supply issues at Cushing? The completion of the Keystone XL Pipeline’s northern leg on its original time line, which would have had it completed and in operations years ago. Instead, that safe, modern, clean pipeline that would have today been bringing several hundred thousand more barrels of oil every day down from Canada was held up for years by Barack Obama at the behest of the climate alarm lobby, and cancelled by Joe Biden on his first day in office as payback for their massive funding of his campaign.
You know what else would have helped prevent Cushing from running critically low on oil stocks? A real, normal supply response by the domestic oil industry to this year’s skyrocketing commodity prices. But that supply response has been muted this year by a combination of Biden’s insane policies and the ESG investor community denying capital to the upstream industry.
Leslie Beyer, CEO of the Houston-based Energy Workforce & Technology Council, had this to say about the problem: “Domestic production should be a top priority that the Administration encourages, as domestic investment is imperative to ensuring there is no shortfall of energy supply. What’s happening at Cushing could happen in other places soon if the administration doesn’t reverse course on its view of our industry. We have 100 years of energy right here in the U.S., and we need the men and women of our industry to be able to do what they do best to produce energy in a safer, cleaner and more secure way than anywhere else.”
We actually have vastly more than 100 years of oil and gas reserves right here in the U.S., but Ms. Beyer’s point is well made. Sadly, we can count on this president and his administration to ignore her advice and continue to take a broad variety of actions to continue to depress the domestic oil and gas industry. As a result, here we are, with WTI over $83 this morning and rising, Cushing running out of oil stocks and Enverus’s daily rig count rising by just 1 rig over the last week.
Insanity. Thanks, alarmists.