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WTI Negative Price and Cushing, Oklahoma, Crude Oil Storage Capacity: The Importance of 15%
Fifteen percent Working storage capacity (1) at Cushing, Oklahoma, is approximately 77 million barrels, which represents about 15% of the United States’ (U.S.) total working crude oil storage capacity, excluding the Strategic Petroleum Reserve (Figure 1). Cushing storage is important to the U.S. crude oil industry because it is the delivery and pricing point for the New York Mercantile Exchange (NYMEX) light sweet crude oil futures contract, typically referred to as the West Texas Intermediate (WTI) contract. Figure 1: U.S. tank farm storage capacity by Petroleum Administration for Defense Districts (PADDs). Source: EIA and KAPSARC analysis. While it accounts for just 15% of total working storage, Cushing represents 100% of the storage capacity for NYMEX contract delivery (2). The dwindling availability of capacity (3) to store crude oil at Cushing (Figure 2) placed extraordinary pressure on the oil markets. This resulted in the first-ever negative settlement price for the NYMEX May 2020 delivery futures contract on April 20, 2020. The price rebounded into positive territory the following day, which was also the final trading day for the contract. Figure 2: Cushing available storage capacity (January 2019 through April 17, 2020). Source: EIA and KAPSARC analysis. Market fundamentals, conditions, and reactions The…
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