Crude oil price: expect empty tanks at Cushing in February

Crude oil price remains close to the 2014 high it hit in the past week amid concerns over tight supplies. At the time of writing, Brent futures – the benchmark for global oil – were hovering below the critical level of $90 at $89.24 after pulling back from Wednesday’s high of $90.53. At the same time, WTI futures were at $87.92.

Bullish outlook

Since the beginning of 2022, Brent and WTI futures have rallied by 15.61% and 17.12% respectively. Amid the ongoing bull run, Morgan Stanley’s forecast is for $100 per barrel in Q2’22. Goldman Sachs also expects the commodity to reach this level later in the year and surge further to $105 in 2023.

OPEC+ meeting

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In the OPEC meeting conducted on Wednesday, the alliance decided to continue with its modest output increases of 400,000 bpd as it struggles to meet the existing targets.

Recently, some countries like Russia and Nigeria have failed to meet the set quota. Even if countries like UAE and Saudi Arabia are in a position to boost production, the organization is keen on maintaining the ‘per-country’ production rule; an aspect that has heightened concerns over tight supplies.

US oil inventories

Crude oil price is also reacting to the dwindling inventories at Cushing. Indeed, the founder and director of research at Energy Aspects, Amrita Sen has indicated that this is one of the reasons for OPEC+ to remain on course.

Cushing, which is situated in Oklahoma, is the largest oil storage tank in the world. It is both the pricing and delivery point for WTI oil and accounts for about 13% of the total amount of stored oil in the US. As such, lower capacity in the storage tank signals tight supplies in the leading oil consumer and the world at large.

During an interview with Bloomberg Markets on Wednesday, Sen noted that the freeze-off expected over the weekend, heightened demand within the US, and increased exports of US oil to Europe are weighing on inventories at Cushing.

The weekly US oil inventories data released by EIA on Wednesday showed that crude oil stockpiles had dropped by 1.046 million barrels in the week ending on 28^th January. In comparison, it recorded a build of 2.377 million barrels in the previous week. Cushing oil inventories dropped by 1.173 million compared to the prior week’s draw of 1.823 million barrels. With the prevalent bullish factors, the predicted level of $100 per barrel for crude oil price appears to be attainable in coming months.