The oil tanks in Cushing, Oklahoma, are hitting bottom, with current inventory at 21.6 million barrels, according to the US Energy Information Administration. This is dangerously close to operational stress levels, which could lead to a supply crisis.

Impact on the Oil Market

The low oil reserves in Cushing are a result of increased demand for US oil, particularly from regions that typically rely on the Middle East for their oil and fuel. The US has become the supplier of last resort, with crude flowing out of Cushing faster than America’s oil drillers can refill it.

US diesel stocks have recently hit their lowest level since 2003, and gas inventories have been falling, about 5% below where they were a year ago. Other US commercial crude storage facilities outside of Cushing are also being drained fast, with a decrease of 7.2 million barrels last week alone.

The world’s oil market could enter the danger zone within a month, with prices potentially becoming volatile and increasing significantly due to a minor problem. An export ban could help keep Cushing from running dry, but it has little political traction and could lead to higher prices in the long term.

Expert Insights

According to David Oxley, chief climate and commodities economist at Capital Economics, oil could easily march above $90 today toward $140 to $160 a barrel in the coming months, and gas could top $5 if the Strait of Hormuz doesn’t fully reopen. Mike Sommers, CEO of the American Petroleum Institute, has raised alarm bells, stating that the US is getting to levels where they are starting to be concerned.

Original reporting: El Paso News (HLL/CB) — read the source article.