Crude Stocks at Top U.S. Storage Hub Rebuild After Nearing Tank Bottoms

(Reuters) — Oil inventories at the top U.S. storage hub rebounded last month after nearing operational lows, thanks to improved pricing at the hub that pulled in barrels from Texas' Permian basin and higher Canadian crude flows, analysts said.

U.S. crude stockpiles at the Cushing, Oklahoma, hub fell to their lowest level in 14 months in October on strong refining and export demand, raising concerns about the quality of the oil and the potential to fall below minimum operating levels.

However, a recent influx of crude from Canada and the Permian basin has pushed Cushing inventories higher for eight straight weeks to 30.8 million barrels. Working capacity is around 78 million barrels.

"When Cushing nears operations' bottom, prices at the storage hub elevate compared to Midland and Houston, attracting barrels into Cushing," said Dylan White, an oil markets analyst with consultants Wood Mackenzie.

Oil flows on Plains All American's Basin pipeline from West Texas to Cushing doubled to 537,000 barrels per day, or 98% of utilization of pipeline capacity, in November from October, according to Wood Mackenzie data.

Pipeline operators typically reduce outflows from Cushing and boost inflows on the lines they control to ensure minimum levels of crude in their tanks, adding to inventory levels at the hub.

Restocking also was aided by crude oil flowing from Canada as oil producers there ramped up output in hopes of an expansion on the Trans Mountain pipeline, which has since been delayed.

Pipelines from Western Canada were 99% full in November compared with 97% in October, Wood Mackenzie data showed.

Stocks at Cushing are likely to build further in the last two weeks of the year as companies push barrels to Cushing from Gulf Coast to avoid year-end inventory taxes in Texas.

Prices for crude to be delivered between February and December 2024 are trading higher than prompt prices, a structure called contango, that signals excess supply and typically increases storage levels.

"We see the contango structure causing storage build first and most aggressively in Cushing and then maybe in other locations," Wood Mackenzie's White added.

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