Although inventory levels at Cushing are at their record high, storage utilization (inventories as a percent of working storage capacity) are not at record levels. Capacity utilization at Cushing is now 77%, a large increase from a recent low of 27% in October 2014.
We have a glut.
I’ve noticed some interesting pricing going on where I live. The price of gas both at the Pilot stations on I-65 and the ones in the small towns by where I live were at the $2.20 range and dropping a penny or two every couple of days.
Then, last thursday, the price at my local area was between $2.07 and $2.15, depending on the station, but all the Pilot and other “near the freeway” stations went to $2.59.
Today, it was still cheap in the towns and the freeway stations were down to $2.46. Since moving to KY from Seattle I’ve noticed the prices are much more overtly manipulated here. The pricing curve looks like a sawtooth with slow and steady drops followed by a sudden 20-50 cent rise in one day, at ALL the stations at once.
But the current environment just doesn’t seem to support it.
I’ve seen the same pricing pattern in SW Michigan for years.
I’ve been reading about oil traders who are betting that the oil they’ve stored at Cushing will be worth more in the future.
Given the fact the Saudis are producing at peak levels with no sign of a slow down, I’m not sure that’s a winning bet.
The price of gasoline is indirectly related to the price of crude oil. Gasoline prices are more related to the storage of gasoline and may vary somewhat on what is is in storage in a particular area.
This time of year many refineries are undergoing maintenance switching to summer blend. This creates a bottleneck in the supply chain causing the supply of crude to increase while the supply of gasoline decreases.
Last week the govenment reported a 9.6 million barrel increase in crude oil inventories while reporting a 4.5 million barrel decrease in gasoline inventories.
This larger inventory is in pipelines,