Analysts Already Looking At Impact Of Completing DUCs -- March 21, 2016

It's time to close out the somewhat "tongue-in-cheek" poll in which we asked whether the Bakken was doomed forever, whether readers were concerned about whether operators in the Bakken would be able to ramp up if oil suddenly hit $100/bbl?

• yes, the Bakken is doomed; it will never be able to ramp up again: 5%
• no, I am not concerned; the Bakken will do just fine: 95%

Thank you. Thank you. Thank you. Some sanity.

The reason we can close out the poll because Reuters is now reporting that some operators are stealthily starting to frack those DUCs, bringing production back up. Reuters posted this six hours ago:

A dreaded scenario for U.S. oil bulls might just be becoming a reality.

Some U.S. shale oil producers, including Oasis Petroleum and Pioneer Natural Resources Co, are "activating" DUCs in a reversal in strategy that threatens to bring more crude to a saturated market and dampen any sustained rebound in prices.

But now, with crude futures hovering near multi-year lows and many doubting recent modest gains that brought oil prices near $40a barrel (CLc1) can hold, the backlog of DUCs is already shrinking in some areas.

Mostly in Texas:

In key shale areas such as Eagle Ford or Wolfcamp and Bone Spring in Texas such backlog has fallen by as much as a third over the past six months.

"If the number of DUCs brought online is surprising to the upside, that means U.S. production won't decline as quickly as people expect," said Michael Wittner, global head of oil research at Societe Generale. "More output is bearish.”

In the Wolfcamp, Bone Spring and Eagle Ford, the combined backlog of excessive wells remains around 600.

About 660 wells could be the equivalent of between 100,000 and 300,000 barrels per day of potential new supply.

For now, most of the wells are activated in Texas, where proximity to refiners allows producers to sell their crude closer to benchmark prices, and by well-hedged companies that have locked in higher prices.

Much more at the linked article. 

For the record, I'm not getting too excited about this -- it would take another 660 wells to be activated to add 100,000 to 300,000 bopd -- this is trivial in a global environment that is producing upwards of 96 million bopd (= 0.3%).

Iran coming back into the market is a much bigger issue.

Furthermore, to put the 300,000 bopd into perspective, remember the earlier article that the IEA cannot account for 800,000 bopd for the entire year of 2015?

I think these writers and analysts are getting ahead of their headlights. 

Do you want to know what will be a gazillion times more bearish and bring oil back to $20/bbl? If, on April 17th, Saudi Arabia announces no freeze, no cut, and instead announce they will increase output by another 2 million bopd to flood the market to drive marginal operators around the world out of business.

Now that would be bearish.

A Screenshot Worth A Thousand Words - March 21, 2016

Note the WTI-Brent spread:

A huge "thank you" to a reader who just sent this moments ago.

(With regard to WTI-Brent spread, remember that expiration dates for WTI crude and Brent crude are no longer "sync'ed." See RBN Energy earlier today. See first comment below.)

I track the WTI-Brent spread here. 

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The Rule Of Three

The "author" over at the Coyote Blog (linked at the sidebar at the right) has had any number of posts on light rail in Arizona; others of us have been more focused on California's "bullet train" to nowhere. We now have our third state with a light rail issue: Hawaii.

The New York Times reports a debacle that can only be compared to the "Big Dig" in Boston:

From the start — when Honolulu officials began talking about building a 20-mile elevated train line near the southern coast of Oahu — there were concerns. How much would it cost? What would it do to the character of a state that has long celebrated its natural beauty and isolation? Can an island in the middle of the Pacific Ocean handle the kind of ambitious public works project one would associate with urban centers like Boston and New York?

Eight years after voters in Hawaii approved a referendum clearing the way for construction of the rail line, many of the concerns that have been voiced during a 40-year debate over the project have turned out to have merit.

The project was initially projected to cost $4.6 billion, but that number now is $6.7 billion, forcing the city in January to approve a five-year extension of a general excise tax surcharge to help cover the overrun.

Too expensive to fail:

City officials are awaiting the opening of two sets of bids, covering the final 10 miles of the project, to see if even that is enough. At this rate, city officials said, it could have the distinction of being, on a per-capita basis, the most expensive transit project in the country’s history.

Yet at this point, even its most ardent opponents are resigned to its completion. Close to seven miles of concrete railway are already arching up to 40 feet over farmland and crowded streets, and pillars are in place for the first of 21 stations. Federal transportation authorities have contributed $1.5 billion to the project, which Honolulu would probably have to return if it were cut back or abandoned.

“People are very angry about it,” said Mayor Kirk Caldwell of Honolulu, as he drove through the streets of his city. “But we are now heading toward eight miles completed. It’s like we are pregnant — we can’t just stop and tear it down.”

And that estimated $6.7 billion for the total cost? Unlikely. State analysts are now penciling in a $7.1 billion cost. 

And so it goes.

Oh, not quite:

“What is happening is what most of us predicted would happen,” he said. “The way I look at it, it might hit $9 billion. They haven’t hit the hardest part yet.”  

He? Benjamin J. Cayetano, a former governor of Hawaii and longtime critic of the project, argued that officials lowballed the original estimates of what it would cost to win voter approval.

Stay tuned.

US Distillates Exported To Northwest Europe From US Gulf Coast Have Surged This Month (March) -- March 21, 2016

Tweeting now:  US EIA data likely to show crude oil stocks increase for week ended Friday, gasoline stocks down. 

Original Post

Platts is reporting:

A total of 1,320,000 mt of distillates have been loaded in the US Gulf Coast for discharge in Europe during March, Platts has estimated, based on data from cFlow, Platts trade flow software.

The figure was about twice the level of the previous estimate, pointing to increased volumes of product loaded in recent weeks.

"The US arb is open", a trader said, driven by "cheaper freight and raised ULSD diff in Europe".

According to the estimate, 11 of the cargoes due to land in March are headed to the Northwest European market, while 18 have set sail towards the Mediterranean.

The article at the link provides more background.

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In Like A Lamb, Out Like A Lion

Even as the UN says there is a huge amount of global warming going on right now, central United States is bracing itself for yet another blizzard:

Potential for blizzard conditions in some areas.

“The heaviest snow is likely to fall from central Nebraska through northern Iowa, central Wisconsin and northern Michigan, where 6-12 inches may fall."

Late in the week, the storm could then move on to parts of Ontario, Quebec, perhaps northern New York and New England.

The Kennedy clan can't win for losing. As they say. 

No New Permits In North Dakota Today -- March 21, 2016

Active rigs:

	3/21/2016	03/21/2015	03/21/2014	03/21/2013	03/21/2012
Active Rigs	32	107	197	184	205

One well coming off the confidential list Tuesday:

• 30948, 680, Whiting, P Bibler 155-99-15W-31-30-3H3, Epping, spud July 15; TD, July 28, peak gas reading of 2,707 units; Three Forks 1st bench, 35 stages, 4.1 million lbs, minimal (if any) halo effect of neighboring middle Bakken wells, t9/15; cum 35K 1/16;

I track the P Bibler wells here.

Six permits renewed, including:

• Whiting (5), three Roggenbuck permits (Mountrail County); one Skunk Creek permit and one Two Shields Butte permit, both in Dunn County
• Armstrong Operating, one Pederson permit in Divide County

One producing well completed:
30257, 2,110, XTO, Tobacco Garden 11X-17B, Tobacco Garden, t2/16; cum -- 


************************************
30948, see above, Whiting, P Bibler 155-99-15W-31-30-3H3, Epping:

Date	Oil Runs	MCF Sold
1-2016	7121	6793
12-2015	11344	13009
11-2015	8214	10525
10-2015	6082	7309
9-2015	1864	629

Not A Steve Jobs Event By Any Stretch -- March 21, 2016

From Business Insider: Apple just dropped the price of the Apple Watch — it's not an encouraging sign.

At today's Apple event, CEO Tim Cook announced that the Apple Watch is the #1 best selling smartwatch in the world.

And to keep that train rolling, Cook says, the Apple Watch is now starting at $299 — a $50 discount from its former $349 starting price.

Cook also says that Apple will be introducing a new kind of Apple Watch band, made from woven nylon, and coming in a variety of colors. 

On my bicycle ride home, thinking about the presentation, I knew that analysts would not be happy. And I have to agree: Tim Cook today was not Steve Jobs.

It was a short event by comparison to usual Apple events. I wonder if the FBI situation is taking its toll.

However, having said that, anyone complaining about the price of the Apple Watch coming down is missing the point. Ford does the same thing: whatever it takes to make sure F-150 remains the #1 vehicle sold in the US.

And, oh, by the way, the money is not being made on the watch. It's being made on the band. My wife has already decided to forego with the "free" Sport band that comes with the $349 $299 watch and will buy the $149 Milanese loop instead.

In fact, now that the Apple Watch has come down $50, I'm going to suggest she look at the $449 link bracelet band. LOL.

John Kemp Looking For US Gasoline Demand Record To Be Broken; EIA Not Quite Ready To Go There -- Yet -- March 21, 2016

Regular readers know my thoughts on record US gasoline demand this summer -- the magic number is 10 million bbls on at least one day. The US has never had a 10-million-bbl demand for gasoline, though it has come close.

Reuters' John Kemp is reporting:

The United States will probably consume a record amount of gasoline in 2016, passing the previous peak set in 2007, and the prospect is helping lift crude oil prices.

Recent data indicates the country is on track for its biggest-ever driving season this summer, which will keep refineries running flat-out turning crude into the motor fuel. 

A rapid expansion in U.S. gasoline consumption has coupled with strong demand growth in India and China, falling crude output in the United States, and hedge funds turning bullish, to send crude and fuel prices surging.

This is so incredibly interesting. I wrote the contango article about an hour ago; now this story. LOL.

U.S. motorists consumed 9.16 million barrels per day (bpd) of gasoline in 2015, just 125,000 bpd short of the record 9.29 million bpd set in 2007.

The U.S. Energy Information Administration (EIA) is still forecasting consumption in 2016 will remain slightly below the 2007 peak. 

On Feb. 23, the EIA published a commentary titled “Motor gasoline expected to remain below 2007 peak despite increase in travel”. 

But the agency has been revising its estimates higher in response to the extraordinary strength in demand exhibited in recent high-frequency data. 

In December 2015, the EIA predicted gasoline consumption would rise by just 10,000 bpd in 2016. By January, it had upped its forecast increase to 70,000 bpd and in March, the agency raised the number to 90,000 bpd.

So, we'll see. 

If we hit a record, the price of oil will rise 5% on that news, all things being equal (the price difference in the interval between 30 days before and 30 days after the 10-million-bbl day). 

Marathon (MRO) To Sell Wyoming Assets; Continue Focus On North Dakota, Texas; Easter -- March 21, 2016; Apple Back At #1

From the Casper StarTribune: MRO is selling its Wyoming assets, some data points:

• MRO had been in Wyoming for more than a century
• in Wyoming, interests had been focused around older fields in the Big Horn and Wind River basins, heavy, sour crude
• looking for $1 billion
• had been third-largest producer in Wyoming

The article also noted that Anadarko Petroleum had greatly reduced its presence in Wyoming also. 

This is a huge opportunity for a multi-billionaire with over-valued assets in other areas (such as art, wine, antiques) to monetize, and build a new fortune in oil.

$1 billion / 7.2 million bbls produced in 2015 = $138/bbl.

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The Apple Page

From USA Today:

The rally in Apple has been enough to push it back past Google parent Alphabet as the world's most valuable company at $587 billion, a title it briefly lost earlier this year.

Alphabet shares are up too, rising nearly 5% over the past 30 days. But even with that gain, Alphabet has slipped behind Apple with a market value of $514 billion.

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Easter Snow In Boston

After a heavy overnight snowfall in Boston, the Kennedy clan does not have to leave town for Easter this year to see snow.

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A Note To the Granddaughters

I'm continuing to read Doctor Zhivago by Boris Pasternak. The number of things I learn seems to be endless.

I finally understand how "they" determine when Easter is to be celebrated.

First, start with two eggs, a cup of milk, and two cups of Bisquick. My mistake, that's how I start when making the perfect pancake ... Easter ..

First start with the spring equinox, when the length of daylight and the length of darkness are about equal -- that would be easy for the shepherds.

When that day/night occurs, then watch for the first full moon. That would be really, really easy for the shepherds.

Easter would then be that very next Sunday. And that's all there is to it. Almost as easy as making pancakes.

Pentecost falls fifty days later ("fifty" from "five" from "penta"). If "fifty" days seems odd, then another way to remember Pentecost, is seven (7) Sundays after Easter, which would be pretty easy to count.

The Pentecost feast is also called Whit Sunday in some countries (particularly Great Britain), and Whit Monday is often a public holiday.

In Doctor Zhivago, Lara and Pasha were married on Whit Monday.

For someone like me, I could imagine in old age forgetting what comes first, Pentecost or Easter, but because of Doctor Zhivago it's unlikely I will ever forget. If one is going to get married in Siberia, would be it be better to schedule your wedding/reception at Easter or on Whit Monday? Well, duh -- fifty days before Easter it's going to be a blizzard of a day in Siberia -- better to wait another seven Sundays and get into a bit of warmer weather.

Is Contango The New Normal? -- March 21, 2016

Updates

Later, 6:58 p.m. Central Time: in the original post below I mention the four factors that suggest "contango" may be the new normal:

• China
• India
• US reserves
• US gasoline demand

Shortly after posting, a reader sent two additional links that continue the theme.

With regard to China, Reuters is reporting that China's Saudi crude oil imports in February hit record high.

China's monthly oil imports from Saudi Arabia hit their second highest level on record in February, while arrivals from Russia also surged, as weak crude prices prompted the world's top energy consumer to bring in record high volumes last month.

China's total oil imports rose about 20 percent on year to the highest ever on a daily basis in February, when near 10-year low global oil prices drove buying from a group of new importers and for state and commercial stockpiling.

I now see this was posted earlier on the blog, but never hurts to post again. Smile. 

With regard to reserves, BloombergBusiness is reporting that Shell posts worst performance on oil reserves since the 2004 scandal:

Royal Dutch Shell Plc said it depleted its oil and gas reserves much faster than it replenished them with new resources in 2015, its worst performance since an accounting scandal that engulfed the company 12 years ago.

Shell said its reserves replacement ratio -- the proportion of oil and gas production during the year that was offset by the addition of new resources -- was minus 20 percent. The company not only failed to replace any of the 1.1 billion barrels equivalent it pumped in 2015, but also wrote off another 200 million barrels to account for the plunge in oil prices.

Back on February 21, 2016, it was also reported that XOM failed to replenish its reserves (in 2015) for the first time in 22 years. Exxon Mobil’s so-called reserve-replacement ratio fell to 67 percent in 2015, much, much worse than Shell, if I read the numbers correctly.

Original Post 

Disclaimer: this is not an investment site. Do not make any investment, financial, travel or relationship decisions based on what you read here or think you may have read here. There will be a link to a site (or sites) in this post: I have no relationship with any of these links. I post this stuff only to help me understand the Bakken better, and one of the ways to follow the Bakken is to follow the money. 

Contango? I've alluded twice in the last few days that I was going to comment on contango. The tea leaves suggest "contango" is the new normal.

I know next to nothing about backwardation and contango, so a quick google search helped a bit.

First, it appears to be relatively difficult to find good historical contango/backwardation charts (probably because no one cares):

This one goes back to 2006, but ends in 2013:

This one, Bloomberg, is a bit more recent, through 2014:

Second, this article, asking the same question I had raised: is contango the new normal? Be forewarned, this last link is a sales pitch of sorts, but that doesn't mean it doesn't have useful information. This is his summary and beginning of his sales pitch:

Portfolio Contango—An Opportunity Not Seen in Decades

If you talk to resource industry titans—the ones who’ve made hundreds of millions of dollars and been in the sector for 40 years—they’re now saying that they’ve never seen the resource share prices this bad.

Brokerage firms focused on the resource sector have not just laid off most of their staffs, but many have shut their doors.

The young talent is the first group to be laid off, and there’s a serious crisis developing in the sector, as many of the smart young guns have left the sector to claim their fortunes in other sectors.

There’s blood in the streets in the resource sector.

Now if you believe that, as I do, to be successful in the resource sector one must be a contrarian to be rich, now is the time to act.

I have invested more money in the junior resource sector in the last six months than I have in the last five years. I believe we’re in contango for resource stocks, meaning that the future price of the best juniors will be worth much more than they are currently.

The writer has a lot of data to support his case. I think he made it much more difficult than it needs to be. I think this would have been much simpler:

• China: can't afford negative growth
• India: on the verge of take-off
• US gasoline demand curve
• deferred/delayed big capital off-shore drilling projects

It's hard for me to believe that we won't remain in contango at least until 2025. There may be some dips, and there may be some dips into backwardation but if they occur, they will be shallow and short-lived.

We May Already Have The Top Story Of The Week -- Premium Prices In The Permian -- Saudi Takes Notice? -- March 21, 2016

I thought we were well past this stage: "inflated" or "premium" prices in on-shore US oil, but here it is from Richard Zeits over at SeekingAlpha, using the same word I often use: exuberance:

Easy access to equity capital has driven acreage prices in the Permian Basin to all-time highs, despite the collapse in oil prices.

In the absence of a strong upcycle in oil, aggressive acreage valuations create a risk of mediocre full-cycle returns for acquirers.

Acreage-centered stock valuations may come under pressure if investors turn their focus to cash flow metrics.

So, what are "inflated" prices being paid? One example:

 Based on my analysis, Parsley's current price of $21.83 per share implies a valuation per undeveloped acre of ~$40,000+ per acre, assuming strip pricing for oil and natural gas. In other words, if one were to look at the valuation of the acquired acreage via the prism of Parsley's current stock price, the acreage experienced a 50% "appreciation."

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Update On Bakken CBR

Palmero CBR Terminal Now On-Line

To get to this first figure, start with ND Geologic Survey (dmr.nd.gov), and then click on "Pipeline Authority." Then ND Pipeline Authority, and finally, "oil transportation table." If the table is hard to read, it can be "blown up" at the source (last link) -- click on the table to enlarge it (to get back to blog, click on "X" in upper right-hand corner when the table shows up:

The Palermo CBR terminal is now shown as active (red line). For more on Palermo, see the link down below.

Northstar Transloading CBR, Fairview, MT, increased capacity from 20,000 to a whopping 180,000 bopd capacity in calendar year 2015 (blue line).

Both Crestwood Holt, Epping, ND, and Dakota Plains, New Town, significantly increased capacity back in 2014 (green lines).

Not shown is the Red River Oilfield Services CBR terminal east of Williston (scalable).

It appears there has been no increase in pipeline capacity since 2014 and the tea leaves suggest the Sandpiper (now scheduled to be on-line in 2019) is dead.

From KXNET last September, regarding the Palermo CBR terminal:

A new rail loading facility is on track to start shipping Bakken crude to the coast this winter.

The Phillips 66 terminal near Palermo will be moving by train about 150-thousand barrels of oil a week starting out.

The facility was built with expansion in mind and at full operation, the terminal could load two 110-car trains every day.

Linking into the Palermo BNSF mainline, the Phillips 66 rail loading facility will streamline the company's Bakken presence.

I track CBR terminals in the Bakken here.  

How Brent Calendar Expiration Changes Influence WTI-Brent Spreads During Contango (Or Vice Versa) -- RBN Energy -- March 21, 2016

RBN Energy: How The Brent/WTI Crude Futures Relationship Got Trickier. This is so cool. Back on January 26, 2016, I noted this change in the expiration calendar. I did not understand all the implications but I had some thoughts.

I am posting this for my benefit to help me understand this issue. I would recommend readers who are interested go to the RBN Energy link. I often make mistakes/misunderstand what I am reading/summarizing. 

Data points from the RBN article, first the background:

January 26, 2016:

• new rules stipulate expiration one month and one day prior to delivery
• the March, 2016, contract, therefore, expired January 29, 2016

How the Brent physical trading market works:

• traders buy and sell 600,000-bbl cargoes produced from North Sea crude streams (BFOE - Brent, Forties, Oseburg, Ekofisk)

Two distinct Brent physical trading markets

• "Dated Brent": transactions for BFOE cargoes that have been assigned to equity producers and given a 3-day lifting window for the buyer's vessel to pick up the crude
• because they an assigned load date, they are knonw as "Dated Brent"
• reporting agencies (e.g., Platts, Argus) assess and publish these prices
• "Paper Brent": BFOE "cash" market 
• for cargoes that have yet to be assigned a loading date
• traded for delivery during a specified forward month; further out into the future than dated Brent
• these forward trades then morph into dated cargoes once a load date is assigned; at least 25 days before the 3-day loading window
• BFOE cash market is linked to ICE Brent futures; the later not a physical market; only cash settled

The January, 2016, calendar change:

• a 15-day timing window for ICE Brent Futures and the 25-day Brent futures calendar resulted in markets being out of sync
• it took 4 years for ICE to implement a Brent futures change to better reflect the physical market
• the change finally came in with the March 2016 Brent delivery contract that expired on January 29, 2016
• the new expiration date mechanism is designed to accommodate at least a 30-day window between the contract expiring and deliver -- reflecting the 24-day window in the physical market as well as a 5-day additional grace period

How it affects the CME/NYMEX WTI futures market

• it turns out this is a big deal: because the prices or spreads between the two futures contracts are so often compared by analyst looking to understand the relationship between the US market (WTI is the benchmark) and the international market (Brent is the benchmark)
• there are also numerous trading strategies involving taking positions in the two crudes
• Both crudes are similar -- all things being equal the spread should be narrow

Now, the calendar dates for WTI:

• WTI is a pipeline-delivered crude that is traded based on US domestic pipeline scheduling
• physical WTI for prompt delivery (next month) has to be scheduled by the pipeline before the 26th of the month prior to delivery
• to reflect this, CME/NYMEX futures contracts expire 3 business days before the 26th of the month prior
• this becomes significant, because when comparing Brent and WTI, it is best to compare prices for the same delivery period
• up until the January 2016 change, one could compare like-delivery periods for all but a few days each month
• the old Brent contract "rolled" from one delivery period to another on/about the 15th
• the WTI contract followed on/about the 20th

How have things changed?

• the default spread between prompt Brent and prompt WTI is far less of an "apples to apples" comparison
• WTI prompt prices have not changed
• Brent now rolls to a new delivery month 16 days earlier 
• thus: for 2/3rds of every month, the spread compares "apples to oranges"
• look at the RBN Energy chart (Figure 1 at the link) to see the inconsistency in delivery periods
• prior to the calendar change, the discrepancy was irrelevant, averaging 15 cents/bbl over the courseof a year
• now, the February 2016 spread was $1.54/bbl higher 
• that "rather large" $1.54/bbl difference in February widened by differences in contango between the Brent and WTI futures market
• thus, the spread between WTI and Brent will be wider because of the contango
• repeating: the contango exaggerates the spread relationship whenever comparing two different delivery periods

Monday, March 21, 2016

Active rigs:

	3/21/2016	03/21/2015	03/21/2014	03/21/2013	03/21/2012
Active Rigs	32	107	197	184	205

RBN Energy: How The Brent/WTI Crude Futures Relationship Got Trickier. This is so cool. Back on January 26, 2016, I noted this change in the expiration calendar. I did not understand all the implications but I had some thoughts. More in-depth notes here. Here, RBN Energy is a huge help:

In January 2016 the ICE futures Exchange changed the expiration calendar for its flagship Brent crude contract. The March 2016 contract expired on January 29, 2016 under new calendar rules that stipulate expiration one month and one day prior to delivery. This was done belatedly to reflect a change in the assessment of the physical Brent market that was implemented back in January 2012.

On paper the change is just an overdue action by ICE to properly align the timing calendar for their popular futures contract with the underlying physical market. But in practice - as we suggest in today’s blog, the change has significant impacts on the calculation and analysis of the commonly utilized spread between ICE Brent (the international benchmark crude) and the U.S. equivalent West Texas Intermediate (WTI) crude futures contract traded on the CME/NYMEX.

Note that this blog is primarily educational – describing the mechanism and impact of the new ICE Brent contract expiration rules on the analysis of the Brent/WTI spread.
We have previously described the Brent physical trading market where traders buy and sell 600 MBbl cargoes produced from four North Sea crude streams (Brent, Forties, Oseburg and Ekofisk – BFOE - see Crazy Little Crude Called Brent Part I).

There are two distinct markets assessed for physical Brent. The first is the so-called “Dated Brent” market that involves transactions between buyers and sellers for BFOE cargoes that have been assigned to equity producers and given a 3-day lifting window for the buyer’s vessel to pick up the crude. Because these cargoes have an assigned load date they are known as dated Brent. Reporting agencies like Platts and Argus assess Brent dated transactions and publish prices used in pricing formulas that determine the value of BFOE and a host of other international crudes.

The second market for physical Brent is the BFOE “cash” market for cargoes that have yet to be assigned a loading date. This market is also known as “paper Brent” and the crude cargoes are traded for delivery during a specified forward month – further out into the future than dated Brent. These forward trades then morph into dated cargoes once a load date is assigned – at least 25 days before the 3-day loading window. In “Crazy Little Crude Called Brent Part 2” we described how the BFOE cash market is linked to ICE Brent futures delivery through an exchange for physical (EFP) mechanism and pricing via an ICE Brent Index that is linked to BFOE market assessments. ICE Brent futures contracts are not physical because they only involve 1000 Bbl parcels and they are cash settled rather than physically delivered. The ICE Brent futures market provides a financial exchange for trading Brent for delivery several years into the future. In “Part 3” of the Brent primer series we discussed market concerns with the quality and volume of Brent stream crudes included in the BFOE market.

It was in response to these concerns that price reporting agencies such as Platts and Argus changed their methodology in 2012 to include more transactions in their Brent Dated assessment by extending the trade window from 21 to 25 days before loading.

If I remember, I might say something about contango later today.