September 28, 2021

Continual draws at Cushing highlight the need for Kpler’s Cushing Drone Inventories

Cushing, Oklahoma, the delivery point of West Texas Intermediate (WTI) and the town often referred to as “The Pipeline Crossroads of the Word” has remained vital to the commodities industry since its inception. With Cushing’s current capacity residing at over 90 mb, it also stands as one of the largest crude oil storage facilities in the world.

The facility's importance as the WTI delivery point, in addition to its sheer, but limited size, help explain why spot prices for WTI went negative in April 2020 - there was simply no additional space to make physical delivery despite capacity utilization only reaching a high of 72 percent. 

Recently, Cushing has seen a multi-month trend of draws. Since early-June, stocks within Cushing have declined by more than 10 mb to hold at 38 mb, according to Kpler’s Cushing Drone Inventories. The continual decline in stocks is completely economic, given steep backwardation along the WTI forward curve, but draws can only be sustained for so long. 

The last time Cushing underwent such a sustained period of inventory declines was through 2018 when the facility saw stocks bottom out near 20 mb, according to the EIA. If history is to be a guide, this provides approximately an additional 13 mb in draws out of Cushing before the market likely grows more concerned about a "tank bottoms" outcome.

Until 2021, Kpler’s methodology for monitoring crude inventories relied upon a combination of satellite imagery, cargo-tracking, and market sources. While those components allowed for the widest and most comprehensive crude inventories coverage on the market; the ability to control imagery collection timing and monitor fixed-roof tanks remained elusive - with accurate insight into Cushing dependent on both. 

It was with the needs of consistent data-collection and complete transparency in mind, all without compromising the data quality the market has come to rely upon, that Kpler began monitoring Cushing through the use of drones.

Kpler’s Cushing Drone Inventories data provides users with consistently collected midweek and end of week inventory and capacity values both released ahead of other market providers.

The bi-weekly values are calculated by monitoring all tanks in the Cushing area, both floating and fixed-roof, through the use of optical and infrared imagery. Kpler provides access to these tank level data points, to allow for the most granular analysis possible.

For analysis beyond inventory and capacity values, Kpler also provides key insights into tank statutes, allowing users to review historical and current operational and maintenance volumes down to the installation level.

It is through the use of calibrated imagery detection, advanced algorithms, and experienced analysts that Kpler is able to continually deliver timely and accurate data able to meet market demands.

With historical data beginning August 2019, Kpler’s methodology has a proven track record as demonstrated by the 99.6% correlation against the EIA’s Cushing inventory values and a 92.4% correlation as compared to the EIA’s weekly Cushing storage delta.

As the market remains focused on Cushing’s downward storage trends, it is now just as important as ever to have access to the most credible source of Cushing inventory data.

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