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WTI Rally Due More On Cushing Inventories Than Egypt Turmoil

Published 07/05/2013, 05:17 AM

Oil bulls were swift to point out this week that the political drama unfolding in Egypt, and the risks it raised to oil and gas transiting the country via pipeline and through the Suez Canal, were the main force driving U.S. crude futures to 14-month highs.

They’re not entirely wrong but fears of heightened Middle East supply risks tell only part of the story. The jump past triple-digits may have a more prosaic explanation and, as Deutsche Bank analysts noted this week, the answer may be sloshing around in the fuel tanks of American oil storage hub Cushing, Oklahoma which is also the delivery point for the benchmark crude oil futures contract on the New York Mercantile Exchange.

Political unrest in North Africa and the Middle East region typically has a more pronounced impact on the benchmark Brent crude oil market. That was certainly the case, Deutsche noted, during the early stages of the “Arab Spring” in the first quarter of 2011.

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