Glut Easing At Cushing? What It Could Mean

Investor's Business Daily is reporting:

A surprise drop in U.S. oil inventories last week, particularly in the Midwest, in some respects supported recent arguments that WTI crude oil prices are headed higher.

If accurate, it could bode well for domestic oil producers, including Bonanza Creek Energy and Oasis Petroleum. It also could mean narrower margins for Midwest refiners like Northern Tier Energy and Phillips 66, as well as wider margins for Gulf Coast refiners.

The scenario hinges on the possible breakdown of the long-term supply glut at the pipeline hub where the benchmark is priced, in Cushing, Oklahoma.

A March 14 report from Robert Campbell, a Thomson Reuters analyst, contends that, despite forecasts for increasing stockpiles at Cushing, the area's inventories have been in decline. Last week, storage there reached its lowest level since mid-December.

Just as important for MDW readers is the WTI/Bakken spread. For the third day in a row, Bakken is selling at a premium to WTI at Clearbrook, MN (the link is obviously dynamic and will change over time; the comments were accurate at the time of posting).