The oil price has resumed its upward trend after last week's somewhat surprising decline. Low storage volumes in the important American oil storage city of Cushing appear to be the cause of this. The stocks are now almost so empty that daily operations are in danger of being jeopardized.
After the unexpected pressure on the oil market last week, the rise in the price of Brent oil continues this week. Until Monday, September 25, the price was still slightly under pressure. On that day, the Brent benchmark reached its lowest price at $93,29. On Wednesday, September 27, oil traded at $95,65. The highest level since November 7, 2022.
At the moment, the fear of lower oil supply prevails. In addition to the lower production of the OPEC countries that has dominated the oil market for months, deliveries at the American oil facility Cushing appear to have fallen. Analysts speak of an all-time low in oil production at this facility. This is a major blow to the US oil market, as Cushing connects many different oil pipelines. Only 15 million barrels passed through the hub during the week of September 23. Volume is expected to decrease by another one million barrels to 22 million barrels in the week of September 22. In June, Cushing received 43 million barrels of oil.
bottleneck
What makes the situation even more exciting is that the volume is approaching minimum operational capacity. If there are fewer than 20 million barrels stored in Cushing, traders say it will be complicated to pump the oil out of the storages. In addition, there is a risk of loss of quality. Just like in the fuel tank of a car, too much water and sand can get into the oil if the level is too low.
The lower volumes are the result of strong US growth in oil demand. At the moment, the market is hopeful that the situation will recover in a relatively short time. Due to planned maintenance, the maximum processing rate in the United States is reduced by 1,8 million barrels per day. Even if volumes pick up again, the problem could quickly reemerge. The planned maintenance should be completed by mid-October. In that case, a maximum could be imposed on the volumes that companies may withdraw from Cushing. This measure would result in a further decrease in the global oil supply.
The price of diesel is slightly higher than last week. Yet the price does not move with sentiment on the oil market. On Thursday, September 21, diesel was trading for €143,98 per 100 liters. The diesel price then rose to €22 between September 24 and 146,54. However, since September 25, the diesel price has been slightly lower again. On September 27, 100 liters of diesel traded for €144,91.