Cushing, a small town of seven thousand in the middle of Oklahoma, used to be an oil town with several refineries. After a decline in oil production, its centralized location, and dozens of new pipelines have transitioned the town into a good location to store oil.
Today, it is the largest crude oil storage hub in the USA and an important price settlement point for West Texas Intermediate (WTI) on the New York Mercantile Exchange (NYMEX). It is the officially designated delivery point in the US where the physical delivery of the oil takes place, making it the most significant trading hub in crude oil in North America.
Tank farms around Cushing are owned by major companies like Magellan Midstream Partners and Enbridge Energy Partners. Currently, there are about 300 steel oil storage tanks. Every day up to 6 million barrels of oil flow through Cushing’s 13 major pipelines in or out of the tanks. As new pipelines went online in 2014 and 2015, crude oil inventories in Cushing further expanded.
At the moment, markets are recovering from a historic supply glut. Recently, it was reported that the glut will probably last until mid-2017 as markets will take time to absorb excess crude in storage and rebalance supply and demand for oil.