Crude stocks at Cushing have been rising in recent weeks, with another build expected for the last week, amid the sell-off in WTI Crude on Friday triggered by fears of the Omicron variant and low liquidity on the long U.S. weekend, energy analytics provider OilX said on Tuesday.
Tuesday’s reading for crude inventories at Cushing, Oklahoma—the designated delivery point for NYMEX crude oil futures contracts—points to another sizeable build of more than 1 million barrels, following two consecutive week-over-week inventory increases in November, OilX noted.
According to the EIA’s latest data from last week, at the end of the week to November 19, crude oil stocks at Cushing stood at 27.4 million barrels, up from 26.6 million barrels as of November 12. During the same week in 2019, crude inventories at Cushing were at 44.1 million barrels.
“As for timespreads at Cushing, from a pure storage perspective the cumulative correction seen over the last week or two has essentially normalised spreads back from the highly elevated and more towards what can be expected from the physical reality,” OilX said on Tuesday.
Last week’s oil price collapse was the result of the market fearing a dip in oil demand in the short term. The view could moderate in the coming days and weeks when more scientific data emerges about the infectious potential, the potential to cause severe disease, and the response of existing vaccines to the Omicron variant.
OPEC+ could also respond to the price plunge from Friday by changing the pace of the planned production increases, OilX says.
The OPEC+ group is meeting on Thursday to decide production levels for January. A growing number of analysts expect the alliance to pause the 400,000-bpd monthly increase due to the still high uncertainty about the impact of the Omicron variant on oil demand.
Oil prices dipped again on Tuesday after Moderna’s CEO Stéphane Bancel told the Financial Times that existing vaccines could see “a material drop” in their effectiveness against Omicron.