Saturday, November 19, 2016

DAPL Effect On CBR To East Coast Refineries -- November 19, 2016

Active rigs:

Active Rigs3964185184185

DAPL, CBR, East Coast Refineries, And All That Jazz
Platts: Bakken discounts deepen as competition heats up. Data points:
  • Bakken Blend differentials at terminals close to the wellheads: lowest assessment since December, 2015
  • Bakken Blend differentials closed at: the average of the NYMEX light sweet crude oil contract (WTI CMA) minus $6.25 / bbl
  • factors for that discount
  • a very, very tight Brent/WTI spread -- now 42 cents/bbl; had been about $2/bbl all summer; but, also
  • the return of Louisiana Light Sweet to the midwest market may also be having an impact
  • one trader suggested there was an increase in volumes of LLS heading up the Capline pipeline
  • but Platts: LSS is still too expensive; at least compared to the Bakken; Platts assesses LSS at WTI plus $1.15/bbl
  • LSS: the "champagne of crudes" -- but still, it's unclear the appeal for LSS when Bakken crude, also very, very, is so incredibly cheap
So, take a breath. Re-read the bullets above if still not sure what is being said. Pressing on. Currently:
LSS cracking margins in the Midwest: $3.30/bbl
  • Bakken cracking margins: $6.37/bbl 
  • the margin has grown steadily since August
  • Platts: margin data reflects the difference between a crude's netback and its spot price
  • netbacks are based on crude yields, calculated by proprietary formulas (see linked article)
  • the cost of getting Bakken to this market is $3.48/bbl, compared to just $1.02 for LLS
  • Comments from the linked article:
  • too early to tell what might be happening and what it means in the future
  • recent pipeline reversals between Texas and Louisiana mean more Permian crudes are now capable of reaching Louisiana refineries
  • if price accordingly, Permian oil could displace incremental volumes of LLS from its home market
What does this mean for East Coast refineries, DAPL, Bakken CBR?
  • with current pipeline capacity out of ND typically full, the marginal Bakken bbl often gets to market via CBR; this cost has traditionally set the floor for Bakken's discount to WTI
  • part of the recent downturn in Bakken could be chalked up to an increase in CBR oil to the US Atlantic Coast, as Bakken cracking margins there are AGAIN in the black
  • how long with that last (an increase in CBR out of ND)? depends on DAPL
  • LINEFILL for the DAPL could BOOST Bakken differentials, POTENTIALLY  MAKING THE GRADE TOO EXPENSIVE TO RAIL EAST -- however, Platts: the devil is in the details
  • traders have pegged DAPL tariffs between $4.50 and $5.50/bbl for uncommitted shippers between ND and Patoka, IL; a further $6.50/bbl would be needed to bring the crude south from Patoka, IL, to Nederland, TX
  • if this $11 - $12/bbl pipeline estimated cost were to pan out, it would be more expensive than the $10.20 Platts assumes in its Bakken USAC rail-based netback calculation
Bottom line: your guess on the effect of DAPL on CBR is as good as mine.

The Literature Page

From The New York Review of Books, "The Long Distance Reader," a review of Robert Gottlieb's Avid Reader, c. 2016.  

The Next Big Thing

It was less than a week ago that I suggested that among the "next big things" for entrepreneurs will be the private-public partnership of laboratories testing current and prospective employees for THC (marijuana  use). Entrepreneurs might also find some ideas over at Outrun Change. Pretty amazing. And it's all just beginning.

On a separate note, it will be interesting how a new administration will address this issue, where state laws are clearly in violation of federal laws.

The Political Page

I remain fascinated by the 2016 presidential election. This is an incredibly interesting article over at Indy100, on so many levels: a Clinton aide explains why Hillary lost. Surprisingly, it seems to be "right-on-target." If the Clinton understood the issue, the question remains, how or why they were unable to address the issue appropriately. In hindsight, one can come up with answers to that question. 

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