Thursday, February 12, 2009

As Cushing nears capacity, downslide in oil prices possible

CUSHING, Okla. - Inventories at the storage hub at Cushing, Okla., the delivery point for U.S. crude futures, have surged to near the available capacity. That is because oil companies are storing crude at Cushing in the expectation that prices will increase in future months.
Analysts say that once the hub's tanks fill to the limit --which at current rates could happen any time--the scramble by suppliers to unload excess barrels could knock already depressed U. S. crude benchmark prices down further.
"Producers would have to offer massive discounts for prompt crude," Nauman Barakat, senior vice-president at Macquarie Futures USA in New York, told the Reuters news agency.
Crude for March delivery on the New York Mercantile Ex-change was around $41 a barrel on Feb. 9.
Cushing's nominal storage capacity is 46.3 million barrels, according to public company filings and industry sources consulted by Reuters. Cushing stocks rose to a record 34.3 million barrels on Jan. 30, according to the U. S. Energy Information Administration.

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