Oil prices face bigger hit as U.S. storage hub brim

NEW YORK (Reuters) – Dwindling fuel demand, with the United States mired in recession, has led to a record oil supply glut at the world’s largest storage site — a factor that could soon trigger another fall in crude prices.

Inventories at the storage hub at Cushing, Oklahoma — the delivery point for U.S. crude futures — have surged a whopping 139 percent to near the available capacity since early October, as sliding energy demand makes holding oil more profitable than refining it.

Analysts say that once the hub’s tanks fill to the limit — which at current rates could happen any time — the scramble by suppliers to unload excess barrels could knock already depressed U.S. crude benchmark prices down further.

“Producers would have to offer massive discounts for prompt crude,” said Nauman Barakat, senior vice president at Macquarie Futures USA in New York. “Prices might fall back to lows around $33 (a barrel).”

Crude for March delivery on the New York Mercantile Exchange was around $41 a barrel on Monday.

Reuters