Wow, Wow, Wow -- Great Article On WTI-Brent Spread -- If You're Following The Bakken, This Is A Must Read -- November 7, 2017

This graph is an eye-opener:

And why is that important?

That's how important the DAPL was to the economy of North Dakota. I think I mentioned this on the blog once before: for many, many years I made donations to Native Americans in South Dakota but during the DAPL protest I sent them a note telling them I would no longer donate, and that they should quit sending me solicitations. Haven't heard from them since, and haven't donated since. Actions have consequences.

But I digress. The graphs are from an article at Bloomberg, "why WTI pries aren't going anywhere."

From the article:

While I emphasized the differences in speculative money flows to the Nymex West Texas Intermediate, or WTI, and Brent crude oil contracts, I didn't give the role of logistics the prominence it deserved. So here goes.

To recap, the spread between WTI and Brent crude prices began widening in late July and has recently blown out to about $6 or $7 a barrel.

Hurricane Harvey's disruptive impact in late August helped push that spread beyond $5. But it had been opening ahead of that and hasn't shown signs of closing since.
Besides Brent's international benchmark, Nymex WTI is suddenly trading at wide discounts to other benchmarks within the U.S., too.

Those premiums of roughly $5 to $6 for Louisiana Light Sweet and WTI delivered in Houston are big flags that something is up with the way oil is flowing within the U.S.
The Nymex WTI contract is settled physically at the pipeline and storage hub in Cushing, Oklahoma, which is hundreds of miles inland from the refining and export facilities along the Gulf Coast. The other  barrels, closer to the coast -- and, therefore, global markets -- are priced more in-line with Brent. Their premiums versus Nymex WTI jumped at the end of August as Hurricane Harvey's disruption kept barrels bottled up in Cushing.

But their continued strength and that other line on the chart above -- for barrels priced in North Dakota -- hint at other, more structural issues.

John Coleman, a senior analyst at Wood Mackenzie, points to the start-up of the Dakota Access pipeline in June. Dakota Access takes barrels from the Bakken down to Patoka, Illinois -- where they compete with barrels coming from Cushing. Better access to Midwestern refiners, as well as pipelines heading south from Patoka to ports on the Gulf Coast, helped close the Bakken discount to WTI and encouraged a bit more production in North Dakota.

Much, much more at the link.