Cushing inventories to test tank bottoms, curbing record US crude exports

As US crude exports are set to achieve another record this month, and as refinery runs are set to ramp up in the coming weeks, Cushing inventories are going to maintain their downward trajectory as barrels are pulled to the US Gulf Coast. On their current trajectory, inventories should test tank bottoms by end-June.

According to Kpler drone assessments, Cushing stocks fell to 28.7 Mbbls last week, down 4.2 Mbbls over the past month, with a further 0.56 Mbbls decline already visible in the latest midweek assessment as of Wednesday, 6 May. It appears that Cushing inventories are going to have to test operationally low levels, likely in June, as a mechanism to tighten price spreads and ultimately curb record US crude exports.

The current pace of draws reflects a structural pull to the Gulf Coast: US crude exports closed April at a record pace of 5.2 Mbd, supported by competitively priced US crude and a surge in VLCC availability following the closure of the Strait of Hormuz. Forecast loadings indicate May exports should surpass April’s record, but upside should be limited by constraints. WTI Midland’s premium versus Cushing tells us that export demand remains strong, while WTI Houston’s discount to Brent tells us exports should remain robust…for now. The Brent-WTI spread will need to tighten to keep the barrels at home as inventories plummet.

Kpler drone Cushing inventories with projection, Mbbls

Source: Kpler

Operational constraints across Gulf Coast export hubs are now shaping incremental growth. Corpus Christi retains sufficient dock capacity, but pipeline bottlenecks should cap exports near 2.6 Mbd. Houston faces the inverse problem: pipeline availability remains ample, but dock constraints are likely to limit flows near April’s 1.7 Mbd pace.

What propelled US crude exports to a record in April was incremental barrels from smaller export hubs. Typically less prolific ports, including LOOP, Beaumont/Port Arthur, and Freeport, contributed an additional 900 kbd of crude exports. Around 590 kbd of that volume consisted of SPR grades and Gulf of Mexico barrels, including Bryan Mound Sour, Bryan Mound Sweet, West Hackberry Sour, Mars, and Southern Green Canyon.

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