The Light Crude Oil - Refinery Need For Heavy Oil Continues -- RBN Energy

Active rigs:

	2/18/2014	02/18/2013	02/18/2012	02/18/2011	02/18/2010
Active Rigs	185	180	199	171	93

RBN Energy:

Natural gas production in the Lower 48 has surged 40 percent since 2005 – hitting record levels in recent months in spite of low prices and a drilling migration away from dry gas to liquids plays. Following a similar trajectory, natural gas liquids (NGLs) output from gas processing plants jumped 40 percent since 2009 as drilling for wet (high BTU) gas accelerated. Crude oil production from shale did not take off until the end of 2011 but since then has surged an astronomical 56 percent to 7.8 MMb/d. While this winter’s harsh weather has placed a temporary slow down on these skyrocketing production numbers, RBN fully expects the growth trend to continue - putting the U.S. within sight of energy independence in the not too distant future.

As a result of new pipeline capacity and rail deliveries, a crude surplus is now building at the Gulf Coast – the biggest refining center in the US. That surplus is complicated by two factors in particular. The first is a mismatch between refinery configuration biased toward heavy crude processing and new supplies that are predominantly light crude. The second is a Federal ban on crude exports except to Canada. The refinery mismatch is putting downward pressure on prices for light sweet crude at the Gulf Coast that many refiners are not able to process without modifications to their configurations. The export regulations are not helping because they prevent excess supplies of light crude and condensate from finding a home in international markets.

A related industry challenge that we have followed closely is that of processing very light crude condensate being produced in increasing volumes in shale basins such as the South Texas Eagle Ford. A number of new build condensate splitters are under construction and planned to process condensate supplies that are a poor fit for Gulf Coast refineries.

In the absence of crude exports, regional refiners are processing the glut of domestic crude headed to the Gulf Coast into refined products for export. That’s in large part because US domestic markets for refined products like gasoline and diesel are flat at best while demand for these products is growing in Latin America, Europe and Asia. Blessed with cheap natural gas fuel supplies and low price domestic crudes, Gulf Coast refiners have become the marginal refined product suppliers to the world and this trend will continue.

The Wall Street Journal

When President Obama killed the Keystone XL 2.0 North, he screwed up plans for a lot of folks. A similar thing, but for different reasons, is affecting shippers with the problems associated with widening the Panama Canal. This is incredibly bad news for shippers; someone is going to take a huge loss:

Shipbuilders are cranking out ever-bigger container vessels and the world's major ports are dredging deeper, all on account of an ambitious multibillion-dollar project to widen the Panama Canal—an endeavor currently stalled by a contract dispute.

More than just the canal is tangled up in the acrimonious battle between Panama and the builders over $1.6 billion in cost overruns.

"There are many cities, countries and port authorities who are spending billions of dollars in anticipation of the traffic that will come from that newly expanded canal," said Adam Putnam, Florida's commissioner of agriculture.

"So, there will be an impact if there is an extended delay." The dispute so far has halted construction for two weeks and now threatens to delay the project by at least three years beyond the proposed completion date of December 2015. Negotiators say they are hopeful of a settlement as soon as Tuesday.

Lamborghini looks to expand. I'm only posting this because of the I-98 series. 

This was reported on the blog over the weekend; it's a huge story in today's WSJ. Chinese jewelry company buys US oil and gas company.

Is it a health-law rewrite or a legitimate delay? And when thinking about that, just remember, the Vietnam "war" was green-lighted with an executive order and a congressional resolution.

Don't look now, but investors have pushed the S&P 500 stock index back almost to a new record. The most ridiculous link I saw yesterday was the DrudgeReport link suggesting George Soros had bet against the market. When you got to the link, it turned out to be somewhat misleading. The link, that is. Drudge has his place, but he risks losing his credibility. Actually, the financial analyst commenting on George Soros' so-called bet against the US stock market told me all I need to know about financial analysts who blog. That's why this is not an investment site.

The Los Angeles Times

Nothing.