U.S. crude oil inventories at the Cushing storage hub in Oklahoma have surged to their highest level in the past two years. The rise in stockpiles can be attributed to refinery outages in the Midwest region hampering demand, along with increased oil flows from Canada contributing to the supply.
Cushing, serving as the delivery point for U.S. crude oil futures, has witnessed eight consecutive weeks of inventory build-up, reversing the previous decline experienced earlier this year. Industry analysts anticipate that overseas demand for U.S. crude, coupled with the resolution of refinery outages, will alleviate the current buildup.
Phil Flynn, an analyst at Price Futures Group, commented, “We expect to see a rise in oil exports. When considering the bigger picture, the supply side remains relatively constrained.”
The Energy Information Administration’s data reveals that unexpected refinery outages in the Midwest have led to the increase in stockpiles, which reached 42.1 million barrels during the week ending June 9, marking the highest level since June 2021.
According to Hillary Stevenson, a senior director at IIR Energy, oil offline in the central U.S. amounted to 579,000 barrels per day (bpd) in May. This figure doubled compared to the 256,000 bpd offline during the same month the previous year.
Stevenson also noted that outages at BP Plc’s and Cenovus Energy Inc’s Toledo refinery in Ohio, with a capacity of 160,000 bpd, as well as Phillips 66’s Borger refinery in Texas, with a capacity of 149,000 bpd, have likely contributed to the elevated stockpiles at Cushing.
Furthermore, John Trischan, senior research manager of oil transportation at Wood Mackenzie, mentioned that slightly increased oil flows from Canada have added to the supply. The Flanagan South pipeline, owned by Enbridge Inc. and with a capacity of 702,000 bpd, reported higher flows in May and June.
Matt Smith, lead oil analyst for the Americas at Kpler, suggested that Canadian crude might have been directed to Cushing as feedstock for the restart of the Toledo refinery, which had experienced a fire incident last year.
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