One Oklahoma Town Key To Oil Prices

Wednesday, October 31st 2007, 12:40 pm

By: News On 6

NEW YORK (AP) -- Oil futures rose to near $95 a barrel for a time Wednesday after the government reported an unexpected drop in crude oil inventories. Much of the decline is blamed on a big drop of 3.1 million barrels in crude supplies at the closely-watched oil terminal in Cushing. Cushing is located west of Tulsa in Payne County.

Analyst Tim Evans with Citigroup says in a research note that the market reaction is clearly due to what he calls a "stunning" drop at the Cushing delivery point.

The overall decline in crude oil inventories is 3.9 million barrels.

Cushing supplies have been under pressure in recent months due to differences in the price between front-month oil contracts and those for delivery in future months. This price difference, or spread gives storage tank owners a financial incentive to sell their oil rather than hold it in inventory.

Analysts also blame falling Cushing supplies, in part, for the rally in which oil prices have jumped 35% since August.

Related stories:

4/10/2007 - Oil Prices Impacted By Oversupply In Cushing

7/26/2007 Oil Prices Rise Above $76 A Barrel On Supply Worries