Major flooding in the Midwest has interfered with crude oil flows from the country’s main storage hub in Cushing, Oklahoma, temporarily pushing prices higher, Reuters reports.
“Flooding seems to have impacted distribution hubs around the United States, slowing stuff coming out of Cushing and creating a bid on WTI,” a market strategist with a Chicago broker told Reuters.
Heavy rains in the region, particularly in Oklahoma, began at the end of last week and there are more storms and rain coming. Since the floods began, at least six people have died in Oklahoma alone. To prevent the worst from happening, the Army Corps of Engineers is releasing water from the Keystone Dam at a rate of 275,000 cu ft per second. This could raise the level of standing floodwaters but at least it would reduce the risk of the levees in Tulsa breaking, according to authorities.
Since the beginning of May, according to the National Weather Service, part of Oklahoma have seen rainfall of up to 19 inches and there is more on the way, which means the interference with oil flows from Cushing as well as other regional storage hubs will persist.
Even so, the effect on oil prices for now has been limited and it was even reversed rather quickly under the double weight of an economic slowdown worry related to the U.S.-Chinese trade war and an extended rise in U.S. crude oil inventories.
At the time of writing, West Texas Intermediate traded at US$58.37 a barrel, down by more than a percentage point since yesterday’s close pressured by these factors. However, as the flooding continues and the risk of a worse supply disruption persists or even increases, chances are the weather situation in the Midwest could reverse the fall. That said, if OPEC+ decides to end its production cuts at its June meeting, this will provide a significant pressure on prices before long.
By Irina Slav for Oilprice.com
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