Cushing crude storage levels have plummeted in recent months, with inventories falling 11.3 million barrels to less than 25 mmbbls between early April and early June, according to Wood Mackenzie. This decline places stocks less than two mmbbls above minimum operational levels, raising concerns about the hub's capacity to sustain current draw rates. The firm's monitoring spans fixed-roof tanks, caverns, and floating-roof tanks, providing visibility into US and global crude storage dynamics that satellite data cannot match.

Supply Disruptions Drive Draws

Rapid storage draws at Cushing have been spurred by global supply disruptions surrounding the Middle East conflict. Although domestic supply remains unaffected in the US and Canada, global shortages have supported surges in US crude exports and refinery runs. "Shifting balances have contributed to steep US commercial storage draws, despite substantial Strategic Petroleum Reserve (SPR) releases into US Gulf Coast markets," said Dylan White, Director North American Crude Markets at Wood Mackenzie.

Operational Floor and Market Response

Cushing storage capacity utilisation fell below 29% in early June, compared to an all-time low of 26.7%, which serves as a reliable proxy for the operational floor. Wood Mackenzie assesses that recent inventories were less than two mmbbls above this minimum. If draws persist, Cushing could reach the floor within one to two weeks. "The pace of Cushing draws has left the buffer exceptionally thin," said White.

Market Implications

The market has reacted as Cushing nears tank bottoms. Permian pipeline flows to Cushing have spiked to maintain minimum physical inventories, while West Texas Intermediate (WTI) price spreads between Cushing and the coast have tightened considerably. Petroleum Administration for Defense District 3 (PADD 3) crude inventories have also been drawing since early May. Wood Mackenzie expects storage inventory draws to accelerate at key hubs across the US, potentially limiting the export response that has helped supplant global supply losses.

Gulf oil supply disruptions are now estimated at 5-6 million barrels per day (bpd), significantly lower than initial projections of 12-15 million bpd, as millions of barrels bypass the Strait of Hormuz undetected. The reduction in perceived supply shortages has helped push benchmark Brent crude futures below $90 per barrel after surging to nearly $120 in early March. Market participants are recalibrating their forecasts as evidence emerges of substantial oil flows continuing despite the conflict in the region.

Initial calculations assumed a total halt of non-Iranian Gulf crude exports, which would have represented the biggest crisis in history. However, data from ship-tracking firms and statements from U.S. President Donald Trump indicate that over 100 million barrels of oil have passed through the strait as part of a secret U.S. mission to support tankers. Shipping data firm Kpler estimated that 136 million barrels of non-Iranian crude moved through Hormuz and Gulf of Oman export channels between April and June 10, averaging approximately 1.9 million bpd.

Alternative Logistics Drive Flows

"After an initial disruption at the onset of the conflict, flows strengthened as alternative logistics scaled up," Kpler said. Iraq, Kuwait, and the UAE have been exporting large quantities of crude in tankers with their satellite systems turned off, according to trading sources. These arrangements sometimes involve cooperation with Iran and sometimes operate independently.

Saudi Arabia has maintained exports of around 4-5 million bpd by shipping from its Red Sea port of Yanbu since March. These combined efforts have mitigated the market impact of the Strait of Hormuz closure, wrongfooting market bulls who had predicted sustained prices above $100 and forecasts of $200 per barrel.

Market Impact and Price Movements

The following table highlights the shift in supply estimates and price movements:

Reined-in Chinese buying has also contributed to easing market pressure, further supporting the decline in oil prices. The ability of Gulf producers to utilize alternative export routes and the undetected movement of tankers have fundamentally altered the supply outlook, reducing the immediate threat of a global shortage.