Strong demand for US crude oil has drawn down inventories at the Cushing hub to a 12-year low, draining storage to a point where a regional price response may be required.
The call on US crude is a consequence of the Strait of Hormuz closure, which has forced global buyers to seek alternative oil supplies. The ripple effect is being felt at Cushing, one of the largest crude oil hubs in the world and the delivery point for Nymex WTI futures.
Since the war with Iran began at the end of February, inventories at the Oklahoma hub have fallen rapidly. Cushing stocks totaled 18.96 MMbbl for the week ending June 19, according to Energy Information Administration (EIA) data, the lowest storage level since October 2014 (see figure). Inventory is near the point where the market starts to worry about tank bottoms, deliverability and operational flexibility.
To replenish depleted stocks, volumes would need to be sent to Cushing from major oil producing basins, most likely the Permian. However, regional spreads continue to favor moving barrels toward the Gulf Coast, where producers and marketers can access export markets and capture stronger pricing. As long as Gulf Coast demand is strong and export economics remain attractive, there is little incentive to redirect barrels inland to rebuild Cushing storage.
The dynamic is complicated by the recent memorandum of understanding (MOU) between the US and Iran, which would lift the US blockade of Iranian vessels and reopen the Strait of Hormuz. The announcement has pressured WTI prices lower, with the July ’26 contract trading under $70/bbl late Wednesday (June 24). However, the MOU remains in limbo; US and Iran officials continue to negotiate the final terms, while Prime Minister Benjamin Netanyahu said last Friday Israel would not withdraw from Lebanon, a condition of the agreement.
The uncertainty could create a timing problem for the market. If crude exports slow before Cushing is replenished, some pressure may ease. Since reopening the Strait and normalizing oil flows will not happen overnight, US exports could remain elevated in the near term, pushing Cushing closer to operationally constrained levels.
If Cushing continues to draw, the next move should be a regional price surge to attract volumes. Historically, the market has responded when stocks were low. This happened in 2018, when Cushing inventory fell to 21.8 MMbbl, and in 2021, when stocks declined to 26.4 MMbbl. Priced jumped on both occasions, and stocks refilled by roughly 1 MMbbl/week. But the response is not guaranteed to show up immediately, especially when broader global factors may drive WTI lower.
Ultimately, Cushing’s refill will depend less on headline WTI prices and more on whether regional basis shifts enough to compete with Gulf Coast export economics. Until that happens, inventories may remain vulnerable, leaving the hub exposed to further operational tightness even if broader crude prices soften. – Emily Cecchini.
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