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The city of Cushing in Oklahoma, United States, is a central hub within the United States and worldwide oil industry. It connects major pipelines within the United States and is the location where the oil futures contracts end up being delivered; the crude oil tanks around Cushing have approximately 91 million barrels of storage capacity, which is the world record for the World’s Biggest Tank Farm, according to the WORLD RECORD ACADEMY.

“The city of Cushing in Oklahoma is a central hub within the United States and worldwide oil industry. It connects major pipelines within the United States and is the location where the oil futures contracts end up being delivered.

“Cushing is a “vital transshipment point with many intersecting pipelines, storage facilities and easy access to refiners and suppliers.” Crude oil flows “inbound to Cushing from all directions and outbound through dozens of pipelines.” In 2005, crude oil and refined products in the US were almost always transported by interconnected pipeline systems. In Oklahoma, eight private companies operated almost all the pipelines and frequently operated oil terminals and refineries: Enbridge; Enterprise Products; Explorer Pipeline; Jayhawk; Magellan Midstream Partners; Plains All American Pipeline; Sunoco; and Valero Energy.

“The crude oil tanks around Cushing have approximately 91 million barrels of storage capacity. On October 28, 2016, tanks held a total of 58.5 million barrels of oil, though it has dropped in 2018.”

“Though the refineries from its boom years earlier in the century are gone, the town of Cushing, northeast of Oklahoma City, is a major storage site for crude oil and gas that comes and goes by pipeline. Cushing also became famous as a trading benchmark for the industry, when, in 1983, the New York Mercantile Exchange selected the price that a 42-gallon barrel of West Texas,” The Center For Land Use Interpretation says.

“Intermediate crude is trading for at Cushing, as an amount reflecting the general price of oil in the global marketplace. Cushing developed as a holding point between supply, coming principally from Texas, and demand, the markets of the north and northeast, like Chicago, to which it is connected by transcontinental pipeline.

“Cushing would be the southern terminus for the Keystone Pipeline from Alberta, should it be built. Several companies operate tank farms south of town, including Magellan, Enbridge, and PXP, with a total capacity of more than 30 million barrels in around 300 above-ground tanks.”

“Today Tank World News journeys to Cushing, Oklahoma, a small town of no more than 8000 people nicknamed the “Pipeline Crossroads of the World” which hosts the world’s largest tank farm,” the Tank World says.

“An oil town since 1912 when the first wildcatters struck oil, it quickly developed major infrastructure and once its own stocks dwindled it shifted to storage aided by a large number of pipes already in place and its central position in the heart of America. Recent figures from Bloomberg Business Week state the total crude stocks (including stock in farms and pipeline fill) to be in excess of 80 million barrels, with a working volume of 65 millions barrels and an increase of 14 million barrels from September 2011.

“Cushing Oklahoma, is the home of 13 oil storage companies including Enbridge, Magellan, Enterprise and more. Currently, there are 13 pipelines bringing crude oil into Cushing with an estimated total capacity of 1.7 million bpd. Whilst going the other way, out of Cushing there are 12 pipelines running in all directions with a capacity of 1.5 million bpd.”

“Cushing is strategically located to pull in barrels from top U.S. shale fields and Canada, while its hundreds of tanks are tied to pipelines that supply U.S. mid-continent and southern refineries and funnel oil to Gulf Coast export ports,” the Reuters says.

“Tank storage of below 20 million barrels, or between 10% and 20% of Cushing’s over 98 million barrels of capacity, is considered close to operational low, say traders. Below those levels the oil is difficult to remove. Water and sediments often settle at the base of storage tanks, making the crude oil at the bottom unable to meet quality standards for refiners or exporters.

“Some tanks have outlets at the bottom that can be used to empty oil and sludge completely, while others do not and therefore the oil at the base cannot be removed completely. At lower levels, it becomes more expensive for companies to get the remaining crude out of the tanks. Roofs of storage tanks also float on the oil, preventing vapors from building up or escaping into the atmosphere. When the legs of these roofs touch the base, it creates a gap between the oil and the roof, causing combustible vapors to form.”

“North American crude oil is pouring into Cushing, where dozens of steel storage tanks fan out from the outskirts of town, tank farms that march on for miles and connect to every major oil patch in North America through an maze of pipelines. Cushing’s nickname is “The Pipeline Crossroads of the World,” the CNBC says.

“It’s one of the largest crude oil storage hubs on Earth, and in the U.S. arguably the most important. Delivery for West Texas Intermediate crude is taken here, priced for Nymex contracts and stored before it’s shipped to refineries.

“However long that process takes, in the meantime, just outside the geographical limits of the tiny town of Cushing, some $2.5 billion worth of black gold is sitting in tanks, awaiting delivery and drawing the attention of the entire industry.”

“This vibrant hub has 90 million barrels of storage capacity where commercial companies are active participants in the market. The storage capacity has grown dramatically over the past few years and now accounts for 13% of total U.S. oil storage,” the CME Group says.

“Cushing’s inbound and outbound pipeline capacity is well over 6.5 million barrels daily. It is interconnected to multiple pipelines, each capable of transporting hundreds of thousands of barrels of oil daily.

“Significant investments in infrastructure, along with increased U.S. oil production, and the repeal of the oil export ban have strengthened the role of WTI as the leading global benchmark. As U.S. oil production continues to increase, Cushing will play an even greater role in the global petroleum landscape.”

“Cushing is known as the “Pipeline Crossroads of the World” for crude oil, with approximately 100 million barrels of storage in the tank farms in the area. The city plays a critical role in the energy sector due to its expansive storage operations and as a significant physical market price reference or benchmark,” the Oklahoma Department of Commerce says.

“The Cushing Economic Development Foundation, Inc. and the City of Cushing announced that Southern Rock Energy Partners, LLC (SREP) has selected Cushing as the site for the company’s next-generation, full conversion crude refinery. The project is expected to have $5.56 billion in capital investment and supply more than 420 full-time employees for operations.

“The project will result in SREP developing a 250,000-BPD next-generation, full conversion crude refinery which will reduce and eliminate 95% of greenhouse gas emissions while producing approximately 91.25 million barrels or 3.8325 billion gallons annually of cleaner transportation fuels including gasoline, diesel, and jet fuel from crudes sourced domestically from the Anadarko, Permian, Denver and Julesburg, and Bakken Basins. The project will be constructed over a 36-month period beginning in 2024 with commercial operations beginning in 2027. Total economic impact for the first decade of operations of the facility to the Cushing area and the state of Oklahoma is estimated to be more than $18 billion.”

“The first oil well in the Cushing area was drilled in 1896, but it was not until 1912 that the Cushing field was discovered in earnest. This field was unique in that it produced a high-quality crude oil that was in great demand by refineries across the country. The oil was also relatively easy to transport, as it was located near several major rail lines,” the 1600 KUSH says.

“One of the most important events in the history of the Cushing oil fields occurred in 1929, when the world’s first oil futures contract was traded on the New York Mercantile Exchange. This contract, which was for the delivery of oil from the Cushing storage tanks, set the standard for oil pricing worldwide and made Cushing a key player in the global oil market.

“Today, the Cushing oil fields continue to play an important role in the American oil industry. The town remains a major hub for oil storage and transportation, with millions of barrels of oil passing through the area every day. While the production levels of the Cushing fields have declined in recent years, they remain a crucial source of oil for the United States and the world.”

“Cushing (Meskwaki: Koshineki, Iowa-Oto: Amína P^óp^oye Chína, meaning: “Soft-seat town”) is a city in Payne County, Oklahoma, United States. The population was 7,826 at the time of the 2010 census, a decline of 6.5% since 8,371 in 2000. Cushing was established after the Land Run of 1891 by William “Billy Rae” Little. It was named for Marshall Cushing, private secretary to U.S. Postmaster General John Wanamaker.

“A 1912 oil boom led to the city’s development as a refining center, with over 50 refineries operating in Cushing over its history. Today, Cushing is a major trading hub for crude oil and a price settlement point for West Texas Intermediate on the New York Mercantile Exchange and is known as the “Pipeline Crossroads of the World.”

“Cushing is a major crude oil hub within the United States and worldwide oil industry. It is a “vital transshipment point with many intersecting pipelines, storage facilities and easy access to refiners and suppliers.” Crude oil flows “inbound to Cushing from all directions and outbound through dozens of pipelines.” Crude oil tank farms around Cushing have over 90 million barrels of storage capacity.”

World Record Academy, November 6, 2023

IMTT announced today that it has closed on the sale of the company’s bulk liquids storage terminals located in Alamogordo, NM; Bremen, GA; Macon, GA; Montgomery, AL; and Moundville, AL to JET Infrastructure.

These terminals collectively represent approximately one million barrels of storage capacity, leaving IMTT with 41 million barrels of storage capacity at its terminals on the East, West, and Gulf Coasts and in the Great Lakes and Canada.

“The proceeds from this sale will be reinvested into current and future growth projects, allowing us to continue executing our Greener and Cleaner strategy,” said IMTT Chairman and CEO Carlin Conner.

“As of today, over half of IMTT’s revenue in 2023 is expected to be generated from the storage and handling of non-petroleum products, such as renewable diesel feedstocks, renewable diesel, vegetable and tropical oils, and chemicals. At the same time, we remain committed to supporting our legacy petroleum positions in advantaged markets across the US and Canada.”

New Orleans-based IMTT will continue to own and operate its 11 other terminals across North America, all of which can facilitate marine product movements, including eight terminals with deep water dock capabilities.

Businesswire, Kim Nave, November 2, 2023

Italy recently announced its plan to deploy its first hydrogen powered train by the end of 2024. The Coradia Stream H – which will run on hydrogen fuel cells – is equipped with 260 seats and has a range of 600 km or 373 miles.

Hydrogen as a fuel for rail transportation remains in its early stages. However, the potential exists for applications including industrial, passenger, freight, mining, rapid transit and even trams or hydrolley or hydrogen trollies. The technology -which is similar to that used in the automotive and aerospace industries is being developed by China, Germany, Japan, Taiwan, the UK and the United States.

Alstrom presented the Coradia iLint™ for the first time at Innotrans 2016 in Berlin. Entered into commercial service in Germany in 2018, it became the world’s first hydrogen passenger train. Using a combination of hydrogen fuel with battery energy storage, the zero-emission train releases only steam and condensed water.

The UK’s first hydrogen-powered train – the HydroFLEX – was launched in 2019 and is fitted with hydrogen fuel tanks, a fuel cell, and two lithium-ion battery packs for energy storage. Development plans are on-going to improve the train’s power and performance.

The use of hydrogen shows promise but comes with numerous technical challenges. Hydrogen is almost three times as dense as gasoline on a mass basis but is far less dense on a volume basis. That means it has to be compressed to produce the same energy per volume.

Germany plans to put a total of 14 hydrogen trains in service. However, given there are more than 4,000 diesel-powered trains running in Germany alone, this nascent hydrogen effort is truly just a baby step. But baby steps eventually turn into adult strides, and that’s where the stop that I believe hydrogen transportation will soon achieve.

Energy Central, Tony Paradiso, November 1, 2023

While oil futures are rocketing – on Friday they were just below $95 a barrel in London – the rally pales in comparison with the surge in diesel.

The world’s oil refiners are proving powerless to make enough diesel, opening a new inflationary front and depriving economies of a fuel that powers industry and transport alike.

While oil futures are rocketing — on Friday they were just below $95 a barrel in London — the rally pales in comparison with the surge in diesel. US prices jumped above $140 to the highest ever for this time of year on Thursday. Europe’s equivalent soared 60% since summer.

And it could get worse. Saudi Arabia and Russia have turned down the taps on production of crudes that are richer in diesel. On Sept. 5, both nations — leaders in the OPEC+ alliance — announced they would prolong those curbs through year-end, a period in which demand for the fuel usually picks up.

“We’re at risk of seeing continued tightness in the market, especially for distillates, coming into the winter months,” said Toril Bosoni, head of the oil market division at the International Energy Agency, referring to the category of fuel that includes diesel. “Refineries are struggling to keep up.”

The situation is challenging for a global refining fleet that’s been dogged by lackluster production for months. Searing Northern-Hemisphere heat this summer forced many plants to run at a slower pace than normal, leaving stockpiles stunted.

There’s also been pressure on them to make other products instead like jet fuel and gasoline, where demand has rebounded hard, according to Callum Bruce, an analyst at Goldman Sachs Group Inc.

Other Fuels

All this comes on top of a global refining system that shuttered less-efficient plants when Covid-19 trashed demand. Now consumption is rebounding but many refineries are gone.

There’s still hope that the diesel crunch can ease. With cooler winter months approaching, the weather-related constraints on the refineries overall decrease — even if some of them will undergo routine seasonal maintenance.

“We think margins have overshot for now,” Bruce said, adding that stretched market positioning and the temporary nature of some refinery disruptions could spark a reversal.

Still Concerns

Even so, there are still worries about supply from some key diesel-exporter nations.

Russia — still a major supplier to the world despite Western sanctions — has indicated that it’s looking to limit the volume of the fuel it sends to global markets. 

China — another potential supply-relief valve — recently issued a new fuel export quota, but traders and analysts in Asia said the volume currently planned won’t be enough to prevent a tight market through the end of the year. The country’s shipments have been stuck near five-year seasonal lows for much of 2023. 

Those lower flows are showing up at key storage hubs. Observable stockpiles in the US and Singapore are all currently below seasonally normal levels. Inventories in OECD nations are lower than they were half a decade ago.

The restricted supply has economic consequences. The surge in US futures has been driven in part by truckers snapping up the fuel.

“Diesel is the fuel of the 18-wheeler truck that moves products from factory to market, so when prices spike, those higher transportation costs get passed on to businesses and consumers,” said Clay Seigle, director of global oil service at Rapidan Energy Group. 

While there has been growing hope that the US economy can avoid recession, “an energy price spike – whether in gasoline or diesel fuel prices – could undermine much of that progress,” he added. “This risk is not lost on anyone in Washington as election campaign season approaches.”

Soaring diesel prices may also push refineries to prioritize the fuel at the expense of making gasoline, he said.

Weak Demand

The situation for diesel could have been worse because consumption growth hasn’t been as robust as other parts of the barrel. 

The IEA’s monthly report last week anticipated consumption growing by about 100,000 barrels a day this year. That compares with almost 500,000 barrels a day for gasoline and more than 1 million barrels a day for jet fuel and kerosene.

“It’s a supply issue at heart,” said Eugene Lindell, head of refined products at consultant FGE. “European refineries were also unable to build up supplies over the summer because of widespread unplanned outages which has left inventories tight ahead of winter.”

Business Standard by Jack Wittels, September 29, 2023

Hopes that inflation might really have been “transitory” look premature.

How worried should we be about the oil price?

I’m only asking because it has gone up an awful lot in the last few months. In fact, since it hit a low for the year in early June, the price of Brent crude has risen from just under $72 a barrel to nearly $94 today – a gain of more than 30%.

Thankfully, the US has not seen the same sort of leap in petrol prices as yet. But it is fair to say that petrol prices in the UK bottomed out in June/July and are now significantly higher – up about 7%, from an average of £1.42 per litre to £1.53 now.

It’s entirely in keeping with the ornery nature of markets that central banks around the globe are now largely agreed to be at or near the peak of interest rates, just as the price of fuel — which is of course, a big component of overall price indexes — is taking off again. That obviously bodes ill for global consumption. Even if the world can avoid the scary cost-of-living crisis expected in a wartime economy, the spectre of global inflationary pressures subsiding anytime in the near future is still a mirage.

Supply is tight, demand uncertain

So why is the price of oil rising? Long story short, the big issue right now is mostly on the supply side. Russia and Saud Arabia have reduced their exports, and have been unusually disciplined about sticking to the plan.

This is happening at a time when the US Strategic Petroleum Reserve has fewer barrels in it than usual, because it unleashed them to try to keep prices down back in 2021 and also when Russia invaded Ukraine, and it hasn’t yet rebuilt that stockpile.

Note too that Javier Blas, Bloomberg energy columnist, warns that oil prices are in fact even higher than most of us might think, because the specific kind of crude that Saudi Arabia produces is priced even higher than the benchmarks most of us watch – that is, Brent crude and WTI (the US benchmark).

So, the supply side is tight. As for the demand side – well, for all that everyone seems to expect a recession to kick in at any moment, we’re still not seeing one.

And bear in mind that this is happening while China’s economy is widely regarded as having sat the global recovery out. Yet Chinese economic data actually surprised to the upside this morning (which is one reason the FTSE 100 is having a good day today).

So, I’d say the risks are quite finely balanced there. Say we don’t have a recession and say it turns out that China was just taking longer to get back on its feet, rather than sinking into depression. The idea of a return to $100 a barrel fairly quickly is by no means radical.

Expect a period of inflation scares

So, what would that mean for the rest of us?

There are two big problems with a rising oil price. One is that — speaking purely in terms of what it does to the consumer prices index — it’s inflationary. That in turn makes it harder to justify cutting interest rates. It might even end up putting more hikes on the table at some point, depending on what happens from here.

The other big problem is that even as a rising oil price makes life harder for central banks, it’s also acting as a tax on consumption. As I’ve mentioned many times before, if you spend more money on filling up your car, you’ve less money available for that microwave pasty or terrible bunch of flowers to go with it. Higher oil prices mean less consumption, and for a consumer economy like that of the US or India, that’s bad news.

Of course, these things should, in theory, work against each other. If oil prices rise to the point where it hurts the wider global economy, then what should happen is that we get a slowdown, and then oil prices fall again, because demand is curbed.

But as we all know, theory and practice often don’t entirely reflect each other, particularly given the lags involved. It’s probably safer to say that this is one reason not to assume that inflation will revert to being well-behaved in the near future. Instead, I rather suspect a series of inflation scares is a more likely outcome over the next few years. But we’ll see.

On the upside, it does mean that the commodity and oil-heavy FTSE 100 will quite possibly do better than anyone expects, which does make it look like an appealing hedge for your portfolio. 

By The Business Standard, September 29, 2023