Crude Supply(?) at Cushing ) part1
Hypothetically speaking, let's say I am a member of the XXXX crude oil cartel. Unfortunately, I have 99% of my country's GDP tied to crude. Now, I need to feed my people, pay bills, subsidize gasoline so my citizen's only pay 25c per gallon, etc. AND to do all that I need crude prices at $70 USD per bbl.
B'cuz I am a member of the XXXX cartel and we have agreed to reduce production, my country is receiving less income. Global demand is falling, so our production cuts haven't caught up with falling demand yet. So, I am spending from cash savings. I don't want to spend all my savings ... so, what can I do to FORCE crude prices to increase?
Again hypothetically, I am not evil, I am also not greedy (smile), I have stupidly initiated a lot of "pork" projects that I must complete or I'll be laughed at by my XXXX buddies, and I certainly don't want my citizens suffering and rioting.
So, calling my XXXX buddies together, we are looking at the crude supply from production to end user to see where we can exert influence to increase prices in the shortest time.
(1) Reduce production - check -
(2) Shipping - lease ships to store crude
a) takes ships out of transport, creates bottleneck by reducing available ships for transport, reduces supply - check -
b) stored crude can be sold later at higher price - check -
(3) look at largest end user AAA - check -
the AAA refineries have their own storage, but get re-supplied from pipelines and leased storage.
Hmmmm! The leased storage in Cushing, OK is the weak link.
WTI trades on global markets.
Lock up the storage in Cushing and the control of the AAA crude markets is MINE. HOW?
If I flood the leased storage to max, flood the pipelines to max, I can sell the futures for the price I want and force WTI production to a stop, putting WTI competition with XXXX cartel out of business. Crude prices in the USA go up, and I win.