Bakken Companies Could Face Further Price Pressure (Downward) -- North Dakota, USA

Link here.

This is the thesis:

U.S. oil, the cheapest in almost two years relative to other grades of crude, is poised to extend its discount.

This is a difficult story for me to follow. I certainly don't trade in oil futures.

However, there are some interesting tidbits in the story.

• West Texas Intermediate (Bakken oil, for the most part) has averaged $1 a barrel more than Brent in the past 10 years, but is currently about $7.00 lower and could drop to $8.50 below Brent.

This is the reason:

The difference between the two crudes has more than doubled this month amid swollen stockpiles at Cushing, Oklahoma, the main delivery point for Nymex futures.

Inventories have jumped 18 percent since November as TransCanada Corp. started a pipeline bringing Canadian supplies to the region. At the same time, outages in the Norwegian section of the North Sea have placed a premium on the earliest deliveries of Brent, the benchmark grade for two-thirds of the world’s oil market. 

A related story with regard to over-supply at Cushing.

Other tidbits:

• The spread will persist -- advantage to Brent -- until the TransCanada Keystone pipeline is completed -- but this doesn't happen until 2013 -- a "long" way off
• As much as 156,000 barrels of additional crude a day will arrive in Cushing from next month once the Keystone pipeline starts
• More may come in during February and March as Enbridge carries out maintenance on the 290,000 barrel-a-day line between Indiana and Ontario

This may explain the reason why Enbridge recently announced that it will ship only sweet oil in the future. With more than enough oil in the pipeline, it might as well ship the "best" stuff (the Bakken oil)