Warehouses in Cushing ensure U.S. crude oil supplies. From there, American West Texas crude is piped to refineries across the country. In normal times, Cushing stores about 40 million barrels of oil, and storage capacity reaches 75 million. However, according to the U.S. Energy Information Administration (EIA), Cushing's current stockpile is 21.6 million barrels.
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Record demand for oil from the US
When reserves fall below 20 million, there is not much that can be obtained from the reservoirs: they already contain mostly useless sludge.
Cushing is running out of oil as America has become a lifeline for regions of the world that typically get their oil and fuel from the Middle East. Demand for U.S. oil has surged to record levels during the war with Iran, and crude oil is flowing out of Cushing faster than U.S. producers can replenish supplies.
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Oil reserves in the richest countries in the world are shrinking by 6.3 million barrels a day and, according to EIA data, amount to only 2.6 billion barrels. That's just 100 million barrels above the operating stress level, David Oxley, chief commodity economist at Capital Economics, told CNN.
The supply of crude oil cannot be used up to the last drop, as in a car. Below a certain threshold, pipelines cannot maintain pressure and refineries cannot deliver products to customers.
With supplies depleting so quickly, the global oil market could enter the danger zone within a month. Even a minor problem can cause panic in the market. Prices can become extremely volatile from one day to the next, and a pipeline leak, refinery fire or even adverse weather conditions can significantly increase oil and gas prices.
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Each time Cushing oil levels approached operating lows, fuel prices reached historic highs: this was the case in 2008, 2022, 2023, the station stressed, adding that the same could happen again within weeks.
“We are sounding the alarm right now,” said Mike Sommers, president of the American Petroleum Institute. “The 'unprecedented' inventory levels are reaching a tipping point,” said Neil Chapman, vice president of ExxonMobil, at a conference in New York in late May. “When you hit that point, prices will skyrocket,” he added.
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Crude oil could easily exceed $90 today, heading towards $140-160. per barrel in the coming months, and the price of gas could exceed $5 if the Strait of Hormuz does not fully open, Oxley said.
However, if the situation does not improve by the end of the year, prices will have to rise much, much more – approaching $200. per barrel, said Alan Gelder, director of refining, chemicals and petroleum markets at Wood Mackenzie.
