Friday, August 11, 2017

Week 32: August 6, 2017 -- August 12, 2017

North Dakota crude oil production still over one million bopd -- June, 2017, data
Highlights from CLR's investor update
CLR's 2Q17 earnings

Bakken economy
Bakken traded higher than WTI this past week 
US states' fiscal health: North Dakota #2, behind Florida 
Legacy Fund update 

Bakken 2.0
Seventeen permits renewed 
Jump in production in XTO's Rink 

The Bakken was a hard nut to crack


  1. One interesting discussion from the conference call was the discount that Bakken crude sells to WTI, and the discount WTI sells to Brent.

    First, WTI discount to Brent. Here’s the transcript of Hamm’s conference call:

    "[T]he market is in the process of correcting as is the disparity between WTI and Brent. The new light oil refining capacity comes online and increased export shipment of light crude take place, this differential will be eradicated to return to dort norms of WTI dominance over Brent."

    Here's how Reuters explained it:

    "Hamm also said he sees the U.S. West Texas Intermediate (WTI) crude oil contract regaining price 'dominance' over Brent, the global benchmark. He cited rising U.S. crude exports and refiners’ increasing ability to process the type of crude produced from shale.

    WTI has traded at a slight discount to Brent for years, but if that dynamic were to flip, it would be a boon for Continental and its peers."

  2. Here's a graph from the EIA that shows how US exports have skyrocketed over the past few months.

    This is critically important to shale oil producers because US refineries are not set up to refine a great deal of LTO, which is a light, sweet crude that is similar in quality to WTI. That’s why exporting LTO/WTI to countries whose refineries are set up to refine light sweet crude is important. Exporting sufficient LTO/WTI to eliminate the current domestic glut of light sweet crude will eliminate the current discount that WTI trades at in comparison to Brent ($3.28 per barrel at yesterday’s closing).

    Here's a graphic that illustrates the problem:

    1. I'll come back to these links and comments later; family commitments (Sophia to gymnastics and swimming lessons) will delay a bit of blogging.

  3. Second the discount that Bakken trades to WTI. These are comments from the conference call:

    "Our crude oil differential guidance for 2017 has improved by $1 to a projected range of $5.50 to $6.50 per barrel for the year. In the Bakken our crude differentials have already strengthened as much as $2.40 in the local markets. Overall, we expect our Bakken crude differentials could improve by as much as $2 per barrel on average in the second half of 2017. We also expect to see continued downward pressure on crude additional infrastructures developed...."

    1. Thank you: two comments --

      1) more and more folks are finally understanding the difference between / implications of heavy oil vs light oil; and,

      2) the importance of pipelines for the Bakken. CRB was "okay" when WTI was $80 and higher, but we are way beyond CBR now -- DAPL was a huge help, but still in litigation (though unlikely to stop the DAPL). I've lost the bubble on how Enbridge is doing getting its pipeline expanded.