Eight consecutive weekly draws have pushed crude inventories at Cushing, Oklahoma to just above the 20 million barrel threshold widely regarded as functional tank bottoms, the level below which the hub can barely operate.
Last week’s decline of roughly 1.6 million barrels was the latest in a sustained run of losses at the facility, which serves as the physical settlement point for West Texas Intermediate futures, and has dragged stocks to their lowest point since October 2014.
Against a total capacity near 90 million barrels, that leaves the hub only about 30% full, but economists say the headline figure flatters the true picture. Much of what remains is thick, unusable sludge settled at the bottom of the tanks.
Oklahoma City University’s Steve Agee, who holds the title of Dean Emeritus in its economics department, put it plainly when speaking to KOCO News, an ABC affiliate. “Most of what we call tank bottoms are kind of sludgy. It’s really not usable crude oil, and they say that the operational stress level at Cushing is about 20 million barrels.”
The relentless national drawdown traces back to late February, when the U.S.-Israel war in Iran effectively shut the Strait of Hormuz, cutting off roughly 13 million barrels of daily supply. Total U.S. crude inventories, including strategic reserves, have shed roughly 79 million barrels over that period.
The Strategic Petroleum Reserve alone gave up another 8.9 million barrels last week.
Wednesday’s Department of Energy report put the national crude drawdown at 8.26 million barrels, more than double the 3.5 million barrel consensus estimate. The IEA separately reported that OECD member country crude inventories fell in May to their lowest level since 1990, with the cumulative drawdown since the conflict began reaching 163 million barrels.
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