WTI-Brent -- The New Benchmark -- June 2, 2023

Locator: 44834WTI.  

Link here. 

I understand oil is a commodity and I understand the concept of fungibility, but I can't but think this development won't be / will be bullish for American shale companies.

American GulfCoast Select -- Happy One-Year Anniversary -- July 14, 2021

Oil: America's new benchmark. Link here. Previously reported but now a bit of the back story and Harold Hamm is center stage. Thank you to a reader. Great story!

American shale oil has a new benchmark, and a driving force behind it is one of the Bakken’s own.

The new benchmark is called American GulfCoast Select (AGS) and Continental’s Harold Hamm is among its architects.

The new benchmark was designed to rival the landlocked U.S. West Texas Intermediate futures contract, which is based on delivery to Cushing, Oklahoma, and which has typically been used to reflect the value of a barrel of Bakken crude oil.

The delivery location for WTI, however, is 500 miles from water, and that has led to market distortions in the past. Most notably, it led to negative $38-dollar futures contracts last year during the pandemic.

Brent, meanwhile, is priced on an island in the North Sea, with immediate access to tanker storage. That insulates Brent from market distortion like that caused by the supply glut caused by the Saudi-Russian price war during the pandemic.

The new benchmark is based on Gulf Coast delivery instead of a land-locked location, essentially giving shale a Brent of its own. That will better reflect shale oil’s value in the world market, and should prevent market distortions due to lack of storage infrastructure.

Hamm, in a recent editorial circulated by the Montana Petroleum Association, said the negative future contracts for WTI were a wake-up that the situation at Cushing, Oklahoma, through which a lot of Bakken crude oil still travels, was no longer tenable.

From Platts:

Platts AGS reflects the value of light sweet crude oil loading 15-45 days forward on an FOB basis from locations along the US Gulf Coast including Houston, Corpus Christi, Beaumont, Nederland, Texas City, and Port Arthur, with the most competitive location on a cargo-size normalized basis setting the price assessment.

This crude oil assessment reflects a typical cargo size of 700,000 barrels, with bids, offers and trades between 550,000 and 800,000 barrels eligible for use in the assessment but normalized to reflect the freight economics of the typical cargo size. The assessment reflects the Platts WTI Midland grade supplied directly from the Permian Basin on the BridgeTex, Longhorn, Midland-to-Echo I/II, Cactus I/II, EPIC, Gray Oak, and Permian Express pipelines with API between 40 and 44 and .2% sulfur limit, among other specifications.

Platts FAQs.  

Also at ArgusMedia. 

And here, with graphic.

And here, if I'm reading the story correctly, AGS runs about $1.00 to $2.00 over Brent.

See original blog post here.

WTI Breaches $53 -- Whoo-Hoo! -- January 12, 2021

NDIC: active rigs up and running:

$53.02	1/12/2021	01/12/2020	01/12/2019	01/12/2018	01/12/2017
Active Rigs	10	55	67	56	36

Rig	Operator	Well Name and Number	Current Location	County	File No	API	Start Date	** Next Location
H & P 515	PETRO-HUNT, L.L.C.	HAGEN 144-98-12C-1- 1H	NENW 13-144N-98W	BIL	36077	33007019170000	12/30/2020	Undetermined
CYCLONE 38	CONTINENTAL RESOURCES, INC.	Gale 8-32H1	NWNE 32-147N-96W	DUN	37399	33025040080000	1/6/2021	Undetermined
NABORS B27	WPX ENERGY WILLISTON, LLC	Dakota 1-36HY	SWSE 1-149N-93W	DUN	37832	33025040830000	1/7/2021	Undetermined
NABORS B6	BURLINGTON RESOURCES OIL & GAS COMPANY LP	F JORGENSON 1D MBH	SESW 11-151N-97W	MCK	37480	33053093720000	1/9/2021	Undetermined
NABORS x10	MARATHON OIL COMPANY	Black USA 11-35H	SWNE 34-152N-94W	MCK	37610	33053094390000	1/8/2021	Bullseye
UNIT 414	SLAWSON EXPLORATION COMPANY, INC.	STALLION 3-1-12H	LOT3 1-151N-93W	MTL	36125	33061044220000	1/3/2020	Undetermined
H & P 492	MARATHON OIL COMPANY	Etherington USA 34-31TFH	SWSE 31-151N-93W	MTL	37675	33061047650000	1/8/2021	Undetermined
H & P 259	MARATHON OIL COMPANY	Watterberg USA 41-5TFH	LOT4 4-150N-93W	MTL	37787	33061047980000	1/5/2021	Undetermined
NABORS X28	HESS BAKKEN INVESTMENTS II, LLC	BL-A IVERSON- 155-96-1312H-8	NWNE 24-155N-96W	WIL	36770	33105052780000	12/26/2020	Undetermined
NABORS B13	OASIS PETROLEUM NORTH AMERICA LLC	Cliff Federal 5300 43-35 5B	SWSE 35-153N-100W	WIL	37266	33105053960000	1/6/2021	Undetermined

Why WTI Surged Today -- June 22, 2018

Earlier this afternoon, I noted that WTI was up  $3.00 today on an announcement that OPEC/non-OPEC would be increasing production by about a million bbls/day. The "OPEC basket," interestingly, dropped $1.54/bbl.

Screenshot at that time:

Then, after I get home from running some errands, I see that oil closed at an even higher level. Screen shot now:

[Note: I'm not going to change the typo in the screen shot above; it should read "3:11 p.m. CDT.]

There are many, many reasons for the price of oil to be trending higher right now, but having said that, about the only thing I know that is different between 8:00 a.m. this morning and 4:00 p.m. this afternoon is the OPEC/non-OPEC announcement.

I've always said predicting the price of oil is a fool's errand. and that was certainly true today. We all knew that the price of oil was going to go up with the OPEC announcement -- it had been telegraphed all week -- but, hey, give me a break, does it make sense that the price of oil will go up when Saudi Arabia says it plans to produce more oil? LOL. Again, remember, other than that announcement, as far as I know, nothing else changed. And, on top of that, "everyone knew" that they were going to raise prices.

The "OPEC basket" held steady at the close but lost over 2% for the day, about $1.54/bbl. Prince Salman needs $80-oil to launch his Saudi Aramco IPO. Several years ago he had hoped for $100-oil.

Half the world, including Goldman Sachs (upstairs), says "lower for longer."

Meanwhile, the other half of the world, including Goldman Sachs (downstairs), there is going to be another bull run in the price of oil.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what I might write, what you might read, or what you think you might have read.

Having said that, I'm quite happy with my investment strategy.

Note: I have not watched any business news, news in general, or talk shows on television since one week ago Friday. My plan is to wait at least one more week with no television (except sports, comedies, and an occasional movie) which brings us to 4th of July week and I definitely won't be watching any television during that week. So, another two weeks. I have no idea what the talking heads are saying: only what I read on a few select sites on the internet and what readers send me.

On June 13, 2018, I posted another installment of sixteen reasons why the price of oil will be going up. I made a huge error, of sorts, at that post.

This could all be greatly affected if Russia and Saudi Arabia agree to increase production. We will know more by the end of June / July. "Those" tea leaves suggest Russia and OPEC will raise production using the excuse that loss of production in Iraq, Iran, Venezuela and global demand forecasts for 2019 necessitates such action.

Technically I was correct, but in fact, I expected the price of WTI to fall -- short term -- if OPEC/non-OPEC announced an increase in production. On that I was wrong.

One last thought: if someone asked me why WTI shot up as much as it did today, this is my answer:

Go back to the sixteen reasons -- and play the song while you are at. None of the sixteen reasons have changed. This is what is new, what happened today. Saudi Arabia said it will increase production, but Saudi is afraid of overshooting the target again (like they did, 2014 - 2016) and so, in their timidity, raised production so slightly in the big scheme of things, traders/speculators are pretty confident that the oil sector is behind the "eight ball" when it comes to production. Which is very bullish for oil.

Why did the "OPEC basket" fall today? I think it has to do with the strength of the dollar.

After Announcement, WTI Jumps $2.15/Bbl -- June 22, 2018

Oil output increasing. It's official. OPEC-non-OPEC (Russia) agree to increase production. No link; story everywhere. But look at this, WTI immediately after announcement -- 

Also, note that the US has asked Japan to stop importing Iranian oil. Yesterday, Iran accused the US of interfering with global oil trade. Well, duh.

That $2.15/bbl jump in the price of WTI is very, very interesting.

********************************

Notes to the Granddaughters

From wiki:

The Renaissance began in Florence, Italy, in the 14th century. Various theories have been proposed to account for its origins and characteristics, focusing on a variety of factors including the social and civic peculiarities of Florence at the time: its political structure; the patronage of its dominant family, the Medici; and the migration of Greek scholars and texts to Italy following the Fall of Constantinople to the Ottoman Turks. Other major centres were northern Italian city-states such as Venice, Genoa, Milan, Bologna, and finally Rome during the Renaissance Papacy.

I was unaware of the close relationship between the Pope and the House of Medici. Pope Eugenius IV moved the pontificate from Rome to Florence in 1434 where the Medici bankers were based. 

An interesting brief history of the Renaissance -- again, which began in Florence -- can be found in Gavin Menzies 1434: The Year a Magnificent Chinese Fleet Sailed to Italy and Ignited the Renaissance, c. 2008, particularly chapter 17. See also Zheng He.

The yield from rice fields is some several times that of wheat. I was unaware that the growing of rice was such a big deal in Italy. From the net:

Italy is the largest rice producer in Europe, and the Lombardy and Piedmont regions are Italy's rice bowl. Rice production in Italy started around the middle of the 15th Century. Today, japonica rice varieties are planted under irrigated conditions in large and highly mechanized farms.

From conigliera:

Asian rice was brought to the Middle East sometime around 1000 B.C., and the most likely route of introduction in Europe was through Spain, conquered by the Moors in the 8th century A.D. Although rice was known to the Romans, and mentioned by Pliny in his Natural History, it was only thought to have some medicinal properties and was not grown by them as a food source.

It was not until the 15th century that rice cultivation spread to Northern Italy, where the fertile swampy plains of the Po river valley provide suitable growing conditions.

In a letter written in 1475 the Duke of Milan claimed that from the one sack of rice he sent as a gift to the Duke of Ferrara 12 sacks could be harvested, if properly cultivated.

This impressive yield led to rice being quickly diffused throughout the region, but up until the mid-19th century only that one variety of rice- called Nostrale- was grown. In 1839 a Jesuit priest, Padre Calleri, returning from the Phillipines imported 43 different rice varieties, and it was from this stock that Italians began to experiment with the varieties that could best be adapted for use in Northern Italy’s temperate climate.

From Menzies, p. 204:

In many ways, the Po River resembles a smaller version of the Yangtze. Both rivers carry melting snows from the mountains eastward to the sea. Both suffer from flash floods and are controlled by a network of canals, locks, sluices, and dams. The waters of both are used to form extensive rice field. The exact date when the Po was first utilized for rice is not known (see above). Clearly it predated 1475 but by how much? Menzies suggests it was after 1435 when Taccola's first drawings of pumps appear, and probably after 1438, when his drawings of lock and sluice gates first appear. 

WTI Flirts With $66 -- January 24, 2018

A reader sent me this, from the EIA:

U.S. crude inventories fell by 1.1 million barrels last week, short of expectations, but the 10-week streak of declines represents a record, according to U.S. Energy Information Administration data going back to 1982. At 411.6 million barrels, stocks are at their lowest since February 2015. [EIA/S] 

I replied, not ready for prime time:

And still not even close to the 10-year median (and the 10-year median would have been even lower had it not been for the Saudi surge in production, 2014 - 2016).

We're a long way from balancing -- my calculations suggest 20 weeks before we're balanced; no change from last week.

In addition, as the price for crude rises, there is a risk Russia and Saudi will start raising production (Saudi will use the excuse they don't want to upset the "synchronized global economy" with expensive gasoline which could cause problems for the economies of China and the US).

With a drawdown only 1.1 million bbls, and "short of expectations," my first thought -- but I decided not to post it on the blog (earlier) -- was this the the low point on drawdowns from here on out?

All I know is I'm glad we have graphics and not just words.

The good news is that this data or something else drove oil to almost $66 today.

Oh-Oh! API Reports That US Crude Oil Inventories Rose A Whopping 6.513 Million Bbls -- November 14, 207

Earlier today I had this "headline": Tea Leaves Suggest US Crude Oil Inventories Are Rising -- November 14, 2017 -- The Market And Energy Page, T+297. I suggested that when I saw WTI drop more than 2% in price.

Here are the API numbers: US crude oil inventories were forecast to fall 2.2 million bbls; in fact, according to API data released late this afternoon, US crude oil inventories ROSE 6.513 million bbls.

I use EIA data, not API data, to calculate the time it will take to "re-balance" (supply/demand).  I have been tracking this data to "re-balance" for 28 weeks. In that time, we have never had a number greater than 6 million bbls in build. See EIA data here.

Worse, the swing (forecast of minus 2.2 to plus 6.513) equals a net 8.713 million bbls -- in other words, according to the API, there are 8.713 million bbls of crude oil MORE than what was forecast.

If this data holds up in the EIA data, it is clear that the Red Queen has not fallen off her treadmill.

Earlier today, the talking heads said the 2% drop in the price of WTI was the news that Chinese demand for crude oil might be dropping. Nope: the 2% drop in the price of WTI was due to the "rumors" of what the API was going to report.

Ouch! WTI Drops To Five-Month-Low; Gasoline Demand Turns Ugly -- The Good News -- The Price Of Gasoline Dropping At Our Neighborhood Exxon -- May 4, 2017

Now, down more than 5%:

Earlier, just down 2%:

Jim Cramer over at CNBC feels comfortable that WTI won't dip into the 30's. Okay.

****************************

Gasoline Demand

Of course, this goes against my argument that jobs data correlates with gasoline demand, but it is what it is. This is simply not good. Gasoline demand is well below what it was a year ago and trending in the wrong direction, and if I recall, last year was not exactly a great year for the economy. Now we have this:

How's That Again? -- Predicting The Price Of Oil Is A Fool's Errand -- December 12, 2016

Screenshot today:

Screenshot today:

Brent is even higher by several dollars.

Screenshot today:

Screenshot today. CVX was trading at a recent low when Gartman suggested ... well, whatever he suggested --- see above:

Whiting, EOG, Oasis To Report Huge Wells Monday; Oil Up $2.15; Futures Up; Good Directions -- December 11, 2016

Futures. Dow 30 futures are up 54 points. Futures don't mean squat ...

Unless. WTI jumps $2.15....

Because. Saudi ready to cut more and ...

Shorts. Worried about OPEC cheating but ...

Could happen, but that's not what the tea leaves suggest. We've seen this movie before. In 1985, Saudi's daily output was around 3.5 million bopd, down from 10 million in 1981. Saudi had lowered their production to prop up prices, but the other OPEC countries were found to be cheating. In response, the Saudis began producing at full capacity. Oil prices plummeted, falling as low as $7/bbl. So ....

Saudi panic. Saudi's breakeven price this year (2016) is $90. Next year, it's $80, or so they say. KSA made one $1 trillion mistake; can't afford another.

Playing shorts like a fiddle? Off-shore can't ramp up; other OPEC countries probably at maximum anyway; US shale -- we'll see.

****************************

Analysts

“Assuming reasonable compliance levels, these cuts will be enough to push the market into deficit,” said Neil Beveridge, a senior analyst at Sanford C. Bernstein in Hong Kong. “This level of coordination is unprecedented.” -- Bloomberg

*******************************

The Political Page

Tea leaves? Rex Tillerson out of the running for SecState? Rick Perry for SecEnergy? Heidi for SecAgriculture? Would follow another North Dakota personality as SecAgriculture: Ed Schafer. One wonders what Schumer would promise Heidi if she would turn down Trump's offer -- Senate now at 52 - 48 -- Schumer can't afford Senate to go to 53 - 47.

Pennsylvania learns tomorrow if their votes have been all for nought/naught. I doubt any sane judge would make that ruling. But who knows?

************************************

Active rigs:

	12/11/2016	12/11/2015	12/11/2014	12/11/2013	12/11/2012
Active Rigs	40	65	186	192	183

Wells coming off confidential list --
Monday, December 12, 2016

• None. 

Sunday, December 11, 2016

• 32339, 1,556, Whiting, Carscallen 31-14-3H, Truax, the Carscallen wells are followed here; 45 stages, 8.2 million lbs; t7/16; cum 41K 10/16; 
• 32417, 257, EOG, Austin 421-2821H,  Parshall, 44 stages; 17 million lbs, t6/16; cum 125K 10/16;

Saturday, December 10, 2016

• 31327, 733, Oasis, Johnsrud 5198 12-18 4T2, Siverston, 36 stages 4 million lbs, t6/16; cum 100 10/16;
• 31328, 714, Oasis, Johnsrud 5198 12-18 5B, Siverston, 36 stages, 4 million lbs, t6/16; cum 126K 10/16;
• 32368, 1,764, Whiting, Carscallen 31-14-2H, Turax, 45 stages, 8.7 million lbs, t7/16; cum 140K 10/16;

***************************************

 31328, see above, Oasis, Johnsrud 5198 12-18 5B, Siverston:

Date	Oil Runs	MCF Sold
10-2016	30193	60862
9-2016	29500	32283
8-2016	22266	30588
7-2016	28141	34550
6-2016	16005	14950

31327, see above, Oasis, Johnsrud 5198 12-18 4T2, Siverston:

Date	Oil Runs	MCF Sold
10-2016	24001	46703
9-2016	14729	19449
8-2016	19827	24927
7-2016	24534	40337
6-2016	17169	20794

32417, see above, EOG, Austin 421-2821H,  Parshall:

Date	Oil Runs	MCF Sold
10-2016	27811	9916
9-2016	28379	14961
8-2016	29105	13882
7-2016	31212	7860
6-2016	8634	1164

32339, see above, Whiting, Carscallen 31-14-3H, Truax:

Date	Oil Runs	MCF Sold
10-2016	7239	20672
9-2016	3813	8127
8-2016	8262	22092
7-2016	18716	37854
6-2016	2677	2502

32368, see above, Whiting, Carscallen 31-14-2H, Turax:

Date	Oil Runs	MCF Sold
10-2016	22997	58071
9-2016	27860	52005
8-2016	36588	53657
7-2016	40916	60777
6-2016	11411	15802

*********************************

Southern California, December 10, 2016

Hedging Could Cause Problems For Some Oil Companies; EOG, CLR Are Not Hedged -- Filloon -- December 11, 2016

OPEC cut/freeze: Saudi Arabia turns to shock and awe, with bigger cuts and more countries joining, after disappointing market reaction to initial OPEC deal. -- John Kemp, via Twitter. 

Active rigs:

	12/11/2016	12/11/2015	12/11/2014	12/11/2013	12/11/2012
Active Rigs	40	65	186	192	183

Bakken update: from Filloon over at SeekingAlpha --

Summary:

• Non-OPEC cuts in oil production total between 612,000 bpd and 558,000 bpd.
• Non-OPEC cuts could take time to play out, as OPEC allowed natural declines to be used as a 2017 oil production cut
• The Saudi Oil Minister stated there could be a more sizable cut announced in the near future
• The Saudis have found the leadership role in OPEC again, and orchestrated a historic cooperative effort with non-OPEC nations

Other data points:

• Oil prices may rise from 15% to 35% over the course of the next 12 months. The initial cut by OPEC caused a 15% increase in the price of oil. This was a short squeeze. $52 proved to be a significant resistance level, as producer hedging has the benefit of contango. 

• Contango is a bearish situation that occurs when oil prices are higher in the future. Backwardation is bullish as front month prices are higher. 

• Since oil prices are now higher by $3 to $4/bbl over 12 months, operators can hedge production for better forward prices. Operators hedge to guarantee a price for production. This is encouraged by banks. Cap ex plans can be developed, as it provides revenue certainty. 

• Operators in the Permian, SCOOP/STACK, core Eagle Ford, and core Bakken see decent returns at $54/bbl or $55/bbl. Producer hedging is creating difficulties breaking to the upside. 

• Although many media outlets have reported a 558,000 bpd cut, the 12 nations reporting totaled 612,000 bpd. The OPEC/Non-OPEC cut represents 2% of world production. 

• The size and scope of cooperation is significant, and could move trading ranges higher. 

• Kazakhstan was a surprise with it's 50,000 bpd cut. It had planned to bring a new field online next year. Significant pressure must have been placed on the country, as the IEA had estimated it would increase production in 2017 by 160,000 bpd. Russian production is also a mystery. It self-reports at 11.2 million bpd. 

• Analysts have noted Russian production closer to 10.7 or 10.8 million bpd. It is possible Russia isn't cutting. OPEC has stated it would accept natural declines as cuts. It is possible these cuts may come into effect over time, and not on January 1st.

• Most of the Bakken and Eagle Ford need a steady $60/bbl oil price to increase production. Both plays will continue to see a production decrease. This will offset gains in better plays. 

• It is very important to take a look at operator's hedge books before investing. Companies like Continental and EOG Resources are not hedged and will realize the full value of a drop in world crude inventories. Many of the Permian players will report sizeable hedging losses next year if oil takes off. Many have swaps in the mid-40s.

****************************

A Note to the Granddaughters

A beautiful, beautiful day in north Texas. A bit cool like the rest of the country but very, very pleasant. Arianna, oldest granddaughter, will be Denton all day today for water polo tournament. Four games back-to-back this morning, then afternoon break, to be followed by two early evening games. Arianna is starter on two teams, and reserve on two older-girls team and the National Program team. Pretty exciting.

After dropping her off, I drove into Denton to get cup of McDonald's coffee. Highlight of that trip: I spotted a bald-headed eagle flying above the highway in downtown Denton. Pretty cool. I've seen many eagles in North Dakota; not sure if I've seen an eagle in this part of Texas before. Will add to my bird-spotting list.

Shares Of Energy Stocks Rising; WTI Rising -- August 18, 2016

I'll be off the net for awhile, but one last thought before going.

If folks take notice, not only is WTI rising, but shares of oil companies are also hitting new 52-week highs. The "stock market" usually "looks" out about six months, "they" say.

Right now, there's a bit of a perfect storm with WTI pricing:

• rebalancing has apparently already begun a bit, simply due to the usual market "supply and demand" conditions
• this comes despite some countries producing at record levels (notably Saudi Arabia and Norway)
• there is a bit of a short squeeze to be factored in (a lot of folks felt the situation was such, the price of oil would drop further; as it goes up, it creates a big a short squeeze on those who had bet "against" oil)
• the talk of the late September OPEC meeting

Most surprising: despite the glut, which by any standard, still remains huge, the price of oil is rising. I do not know to what extent the strength/weakness of the dollar is playing into this.

Later, let's see what the pros wrote about WTI. I wrote my post about an hour ago (the date/time stamp will have the exact time. The note below was started at 4:10 p.m. Central Time, same day, from Investors.com/Yahoo!Finance. Data points:

• Brent oil topped $50 / bbl for first time in six weeks
• continued optimism that top oil producers will agree to cap output next month
• US shale firms place more bets on a booming formation in Oklahoma
• Jones Energy is joining CLR in Oklahoma: Jones will acquire 18,000 net acres for $136.5 million ($7,600/acre)
• companies are rushing to take advantage of the new plays as production in North Dakota's Bakken falls off

Monday; Spearfish-Like Oil Heavily Discounted At Gulf Coast

Active rigs: 184

RBN Energy: Brent and WTI take separate paths.

The Brent premium to West Texas Intermediate (WTI) on Friday (October 18, 2013) was $9.14/Bbl – indicating a new disconnect between US crude prices and international levels. Unlike last time a big Brent premium to WTI opened up in 2010 the price of Light Louisiana Sweet at the Gulf Coast is still tracking with WTI rather than following Brent. This suggests that the US Gulf Coast is long crude at the moment and that imports of Brent priced crude are not required. Today we discuss the current Gulf Coast crude market.

Note: "imports of Brent-priced crude are not required."

I think we may close the nominations for the 2013 Geico Rock Award and simply give it to the publisher of The Dickinson Press. 

More from the RBN Energy story:

This sudden divergence in the Brent price runs counter to the thinking of many analysts. That is because it signals that US Gulf refineries currently have adequate crude supplies and do not need imported barrels – certainly of light crude but also of medium grades as well -  i.e. any crudes with prices linked to Brent. If there were demand for these imported barrels then theoretically the price of LLS would be tracking closer to Brent because those imports would compete with LLS for the attention of Gulf Coast refiners.

With LLS at a near $6/Bbl discount to Brent the Gulf Coast is not attracting imports.

Why is that such a shock? After all, US production has been increasing in leaps and bounds and we know that a lot of shale crude has been arriving at Gulf Coast refineries from North Dakota, the Permian Basin and the Eagle Ford. The reason for the surprise is that Gulf Coast refineries were (up until early October) running at over 90 percent of capacity and although more domestic crude is making its way to the region, most believed that refiners still need plenty of imported supplies to make up their feedstock requirements.

But this week, prices seem to be telling us that the Gulf Coast is awash with crude supplies. LLS crude is trading at a $3/Bbl premium to WTI – less than the cost of transport from Cushing to the Louisiana Gulf Coast (where LLS is delivered at St. James). The Houston price for WTI is tracking neck and neck with LLS. So Louisiana refiners are getting adequate supplies from local offshore production, barges from Corpus Christi or rail from North Dakota and have no need for Cushing barrels. In any case the current work to reverse the Ho-Ho pipeline means there is no pipeline link from Houston to St James. Even heavy crudes look to be over supplied at the Gulf Coast at the moment.

The price of two heavy sour grades – West Texas Sour and Southern Green Canyon  - were discounted last week by more than $7/Bbl to WTI due to low demand for these crudes by Houston refineries. In short – Houston and Louisiana Gulf Coast refineries appear to have plenty of crude.