Explaining The Double-Digie WTI Discount -- The Bakken Is Not Mentioned -- May 31, 2018

I don't particularly care for this writer, nor the site. I haven't closely read the entire article, but it's probably as good as any article on this issue. For the archives.

Explaining the double digit WTI discount.

The Bakken is not mentioned but Platts discussed the Bakken at this post. 

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Mission Complete -- Finally

Wow, this voyage never seemed to end. Finally, the Nave Photon is scheduled to reach its destination tomorrow, June 1, 2018, after leaving LOOP, March 28, 2018.

The Nave Photon is tracked here.

Here is the original story: Second fully-laden VLCC has departed LOOP with export cargo.

The Louisiana Offshore Oil Port (LOOP) announced on Wednesday that this month it has successfully loaded its second VLCC for export and the vessel is heading for a port in Asia, according to Reuters. Navios VLCC Nave Photon was chartered by Houston-based Shell.

I'm not sure if the ship is bound for Singapore or China. Early on, its destination was said to be Singapore, according to "Marine Traffic," although press releases suggested its destination was mainland China. It seems it passed Singapore some time ago and its current position is near mainland China. I originally thought it was headed to mainland China like the first VLCC that departed LOOP earlier in the year.

I could probably sort it out -- but I'm too tired and I really don't care any more. All I know is that it is supposed to arrive at its Asian destination June 1, 2018.

So, will we see a report of a "third VLCC departing LOOP"? Probably not. Does anyone remember the third astronaut to walk on the moon? We hardly remember the second, much less the third.

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I haven't posted a video in a long, long time. I've simply been too busy. Need to find something.

This is as good as anything:

The House of the Rising Sun, The Animals

Bakken Crude Differentials Soar On Widening Brent-WTI Spread -- Platts -- May 30, 2018 -- Williston Bbls Rise To Parity With Clearbrook For First Time

Updates

Later, 2:52 p.m. CDT: regular readers of the blog know that I have said many, many times, operators in the Permian may be struggling, vs the Bakken operators who should be doing very, very well. Some thoughts, right, wrong, indifferent. If you are not seeing the same thing, we are probably watching different movies --

• costs going up significantly
• 460 rigs in the Permian vs 60 rigs in the Bakken; overall production in each basin not all that far apart
• Permian pipelines maxed out; no short term solutions
• high CAPEX costs as operators try to recover entry costs
• interest rates going up
• in addition to pipeline, other infrastructure in place in the Bakken
• the Bakken: in the "manufacturing stage"
• the Permian: boom phase and all the problems associated with the boom 

Original Post

 
This is a "keeper." The entire article has been archived. A must-read for anyone interested in the Bakken.

Platt's link here.

Bakken crude differentials soar on widening Brent-WTI spread Houston (Platts)--30 May 2018 615 pm EDT/2215 GMT.

Bakken crude differentials for delivery in July rose sharply Wednesday to multi-month highs, flipping to a premium to the NYMEX WTI calendar-month average amid further widening Brent-WTI crude spreads, with Williston barrels rising to parity with Clearbrook for the first time.

Bakken had a very active spot market, with differentials heard going up continually throughout the day. [A reminder: CLR is not hedged.]

"This is pretty wild," a market source said.

Sources cited the further widening Brent-WTI spread, which rose above $9/b during the day, as the primary driver of the rally, giving the incentive to ship Bakken barrels south to the US Gulf Coast. S&P Global Platts assessed the July-delivered crude spread at $9.52/b -- the highest in more than three years.

Close to the oil wells in North Dakota, Williston-origin barrels for rail transport were heard traded as high as NYMEX WTI CMA plus 25 cents/b, a steep rise of $2.20/b from Tuesday's assessment. This was the highest differential since November 11, when it was assessed at NYMEX front-month WTI CMA plus 35 cents/b.

Williston barrels for delivery on the Dakota Access Pipeline were heard traded as high as NYMEX WTI CMA plus 20 cents/b.

Bakken crude in the Clearbrook, Minnesota, hub that supplies the Midwest market, meanwhile, was talked valued at a rare parity with Williston barrels, equivalent to a rise of $1.45/b day on day. This was the first time Williston barrels rose to parity with Clearbrook since S&P Global Platts started assessing the former in April 2014.

Much, much more at the link.

This might be a good time to write a thank you letter to Judge James Boasberg and all those who supported the DAPL.

Meanwhile, the Canadians are still trying to figure out how to get their landlocked bitumen out of Alberta, what with continuing challenges with the Keystone XL; Enbridge Line 3; Energy East pipeline; Trans Mountain. 

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on anything you read here or think you may have read here.

From the Financial Times:

US oil prices are falling well behind their international rivals, as booming shale production has created pipeline constraints, driving the biggest discount to North Sea Brent in three years. 

On Thursday (today), US benchmark West Texas Intermediate‘s discount to Brent crude moved above $11 a barrel, a level not seen since 2015, in the latest sign inland US crude markets have become swamped by rampant production. 

Brent was near $78 a barrel while WTI traded closer to $66, before recovering. Traders and analysts say WTI’s discount to Brent— known as the Brent-WTI spread in the industry — reflects pipeline constraints in two key areas that have intensified over the past three weeks. The discount was closer to $5 a barrel in early May.

The deep discount first appeared in the heart of the Permian Basin — the most prolific US shale field — around the city of Midland in west Texas. It has since moved to Cushing, Oklahoma, a tank storage hub that can also be a detour for Permian barrels flowing towards refineries and oil export docks on the coast of the Gulf of Mexico.

Traders have essentially maximised capacity on pipelines running out of Cushing to the Gulf Coast as US crude production has risen towards 10.5m barrels a day while demand for exports frequently tops more than 2m b/d.

Bakken? Not mentioned. And folks know. Memo to self: write letter to Judge James Boasberg.

Other sites of interest:

• daily Bakken spot price
• WTI-Brent spread 
• the Bakken-WTI-Brent spread back in 2012 (I have no idea what the photograph at the linked article has to do with the story)

The Canary In The Coal Mine -- WTI-Bitumen Spread

Early on in the Bakken, a lot of folks were concerned whether the boom could last if the price of oil fell. I always maintained that as long as they were mining bitumen in western Canada, the Bakken boom was "safe." The premise is that the margin on Bakken oil is much better than the margin on bitumen. If operators can make a profit, or stay in business long enough for the price to come back in the Canadian sands, they can do as well or better in the Bakken.

So, this was a nice article to see (sent to me by Don -- thank you). The Calgary Herald is reporting:

Alberta bitumen passed the $85 per barrel mark this week.

That's almost double what Alberta was getting for its raw bitumen in January, when prices were about $45 per barrel. And since all prices are based on U.S. dollars, and the loonie has dropped in value compared to its American counterpart, Thursday's price of $85.50 looks even sweeter.

The most important international benchmark, West Texas Intermediate (WTI) oil at Cushing, OK, was trading for $101 per barrel. And Western Canada Select (WCS), the benchmark blend that includes bitumen, was $91 per barrel at the Hardisty terminal, according to trading data from Flint Hills Resources.

The resulting differential of just $10 per barrel is considered excellent for western Canadian producers, and an improvement over the $16.50 average differential last month. In January, it was as high as $40.

An earlier article noted how bad the spread can be. 

Just How Bad Was the WTI/Western Canadian Select Heavy Crude Oil Discount?

The Oil & Gas Journal is reporting:

The price of Western Canadian Select (WCS) heavy crude oil rose from $58.38/bbl (US) in February to $66.73/bbl in March and about $68/bbl in April, reported the analyst, Patricia Mohr, in a commodity price report.

The WCS discount against West Texas Intermediate crude fell from a record high $36.94/bbl in February to $26.23/bbl in March, $23.07/bbl in April, and, based on futures values, $13.90/bbl in May. The WCS discount is growing again in June.

It is my understanding that it is more expensive to produce oil in the Canadian oil sands compared to the Bakken. 

Everyone has their own numbers, but my numbers: Canadian oil sands need $60 oil to make money; the Bakken operators can make money on $40 oil. Some say those figures are high.