(Corrects rise in Cushing stocks to 2.3 million barrels, not 4.4 million barrels)
HOUSTON, March 11 (Reuters) - Blueknight Energy Partners LP has increased storage rates and lengthened contracts at the key U.S. oil hub in Cushing, Oklahoma, which is expected to reach full capacity in the next two months due to cheap crude supplies.
Chief Executive Mark Hurley told analysts on Wednesday the crude market’s contango - where the near term prices is cheaper than future prices, giving customers incentive to store then sell barrels later at the higher price - since the fourth quarter has sharply increased demand, letting Blueknight renew contracts at higher rates and longer terms.
He said nine-month contracts were renewed at 23 months, and all of the company’s 6.6 million barrels of crude storage at Cushing is contracted through 2015. The next renewals will come in 2016, he said.
Hurley declined to disclose those rates, except to say “it’s been changing fairly rapidly over the last six months, obviously on the rise.”
The CEO said Blueknight believes Cushing will be nearly full by late April to mid-May.
The U.S. Energy Information Administration said Cushing inventories rose 2.3 million barrels to 51.5 million barrels last week, just 324,000 barrels shy of the 51.9 million-barrel peak since the agency started tracking it in 2004.
In the fourth quarter and before the contango boosted demand, Blueknight’s operating margins in its storage segment fell $2.3 million to $4.1 million, and for 2014 slipped $8.3 million to $18.8 million on lower demand, executives said during a quarterly earnings call. (Reporting By Kristen Hays; Editing by Anna Driver, Marguerita Choy and Christian Plumb)