Crude by rail is shifting to the West Coast in a big way. By the end of 2012 unit trains carrying light sweet Bakken crude had begun to flow to Washington State refineries. In 2013 West Coast refiners and terminal operators have continued investment in terminals to receive oil from the Bakken and Western Canada. Today we survey developing West Coast crude rail terminals.
Daily Energy Blog
Wednesday, 4/10/2013
Category:
Crude Oil
Tuesday, 4/09/2013
Category:
Energy
Last week our attention was drawn to the “State of Energy” report published by the Texas Independent Producers and Royalty Owners (TIPRO). Using Bureau of Labor quarterly census data the report provides a summary of state and national benefits attributed to growing US oil and gas production during 2012. For example, TIPRO reports that oil and gas industry employment increased by 65,000 to 971,000 in 2012. But the benefits of increased production are not just confined to the oil and gas industry. According to a presentation by the Chamber of Commerce Institute for 21st Century Energy (ITCE) the shale revolution provided $237B of growth to the US economy in 2012. Today we look at how huge changes taking place in US energy supplies impact the wider economy.
Monday, 4/08/2013
Category:
Natural Gas
Storage, the great balancing mechanism of the natural gas market in North America is heading toward another evolution in its usage, flow patterns and economics. Not too many years ago, natural gas storage was the hottest midstream investment opportunity going, expected to synchronize inbound flotillas of LNG imports with seasonal domestic demand. Winter vs. summer price differentials were wide, prices were volatile and storage economics looked great. When shale gas happened, those differentials evaporated along with storage economics. Today another phase looms for natural gas storage as Marcellus and now Utica production ramp up on top of (or more accurately, underneath) the largest storage region in the world – the Northeast U.S. This is a big topic with big implications. So rather than jumping into the middle of the upcoming gas storage transformation, we will walk through a multi-part North America natural gas storage blog series - its history and status, its challenges, who’s involved, and finally what could be in store going forward. Today we’ll start with some natural gas storage basics.
Sunday, 4/07/2013
Category:
Crude Oil
Last week (see Sailing Stormy Waters) we reviewed limited market options for Western Canadian heavy bitumen crude producers. The US Gulf Coast is the only viable market with significant refinery capacity to process these crudes. At the moment there is limited transport infrastructure in place to get them there. As a result prices are being heavily discounted in the over supplied Midwest market. The Canadian benchmark Western Canadian Select (WCS) price traded this January at a discount of more than $38/Bbl to the US benchmark West Texas Intermediate (WTI). Today we examine how much prices are likely to improve once the pipelines are built.
Thursday, 4/04/2013
Category:
Crude Oil
Last June (2012) the largest refinery on the East Coast was on the brink of closing - in part due to higher international crude prices (versus US inland grades). Since then the 330 Mb/d Philadelphia Energy Solutions refinery has reopened and along with several of its competitors the new owners have developed means to get access to lower priced crude from North Dakota and Western Canada using rail. Today’s episode of our continuing crude by rail series is a survey of East Coast rail offloading facilities.
Wednesday, 4/03/2013
Category:
Natural Gas
Earlier this week (see Spring, Spring, Spring is in the Air) we looked at the US natural gas supply demand picture. Our analysis focused on the 25 percent run up in NYMEX natural gas futures prices to $4/MMBtu this year (they have since slipped back to close yesterday at $3.90/MMBtu). Prices rose because high winter demand helped demolish a huge gas storage surplus that hung over the market and depressed prices since last spring. The market should not forget however that for a time last year – with prices below $2/MMBtu and Lower 48 dry gas production through the roof - there was talk of hitting the “storage wall”. A sharp increase in power burn soaked up 6 Bcf/d of natural gas last summer and helped the market out of that scrape.
Tuesday, 4/02/2013
Category:
Crude Oil
Western Canadian heavy crude producers are getting desperate to find markets for oil sands production expected to increase by 1 MMb/d over the next 3 years. Few Canadian refineries can process these heavy bitumen crudes and domestic Canadian conventional crude production exceeds local refining capacity. Of all the current market alternatives, the US Gulf Coast is the most logical. Transporting heavy crude to that market continues to be constrained by a lack of infrastructure. Oversupply into the Midwest market and continued uncertainty about infrastructure have created a volatile price environment. Today we begin a two-part analysis of the Gulf Coast market for heavy Canadian crude.
Monday, 4/01/2013
Category:
Natural Gas
Last Thursday (March 28, 2013) the CME Henry Hub natural gas futures contract closed out the first quarter of 2013 at $4.024/MMBtu (prices slipped 0.9 cents to $4.015/MMBtu Monday). A year ago the futures price was $2.126/MMBtu – about half what it is today. During that same period, US dry gas production has risen by 0.5 Bcf/d to 64.1 Bcf/d and natural gas power burn has fallen by 2.2 Bcf/d (source: Bentek). With production still increasing and demand from power generation falling it seems unlikely that the market can sustain $4/MMBtu prices. Today we look at the supply demand picture at the end of the winter season.
Sunday, 3/31/2013
Category:
Refined Fuels
The start of April marks the traditional summer driving season. Domestic demand for gasoline is waning due to renewable fuels and higher fuel economy standards. At the same time the tight oil shale revolution is delivering greater volumes of lighter sweeter crudes to US refineries – including condensates. Those light crudes produce more gasoline when refined but can cause problems for refineries not configured to handle them. Today we describe a revolutionary process that could potentially bypass refinery distillation.
Wednesday, 3/27/2013
Category:
Crude Oil
Cushing, Ok has historically been known as the “Pipeline Capital of the World”. That was before the pipelines got congested in 2011 and inventory piled up – creating a discount warehouse for crude. As producers waited for pipeline infrastructure to come to the rescue the railroads took up the slack. Now crude rail loading terminals are being operated and built in every production region in North America and it is reported that crude is being trucked out of Cushing and loaded onto trains. Today we complete our survey of crude loading terminals.
Tuesday, 3/26/2013
Category:
Natural Gas
Over the past two years, natural gas production from the Appalachian region has soared with growth in the Marcellus pushing total production beyond 10.5 Bcf/d. Just next door the Utica Shale is coming into focus with attractive economics due to the natural gas liquids, crude oil and condensate production. The looming question is natural gas takeaway capacity. With Marcellus production continuing to grow and Utica supplies coming on, production in the Northeast will soon exceed regional consumption and will need to be moved out of the region to other markets in the U.S. and Canada. To accomplish this, new pipelines have been proposed and reversals of existing infrastructure that was originally built to transport gas into the region are being implemented. Today we review another of the proposed projects.
Monday, 3/25/2013
Category:
Natural Gas
Last week (March 18, 2013) the CME NYMEX Henry Hub futures contract open interest reached a record 1.32 MM contracts. The previous high was in April 2012. Open interest represents the number of positions held by futures market participants that are not yet offset by another transaction, by delivery or by exercise. Today we look at what lies behind the run up in natural gas futures traffic.
Sunday, 3/24/2013
Category:
Crude Oil
The West Texas Intermediate (WTI) discount to Brent has narrowed 30 percent in 2013 to close at $13.95/Bbl on Friday March 22, 2013. At the same time Gulf Coast Light Louisiana Sweet (LLS) prices have moved unexpectedly to a $6.75/Bbl premium over Brent. Is the WTI discount to Brent finally unwinding? If so – then why are LLS prices trading above Brent? Today we update our analysis of the WTI/Brent spread.
Thursday, 3/21/2013
Category:
Natural Gas Liquids
Today’s blog is something different. It is a special feature covering a unique aspect of the NGL/LPG industry, known as the LPG Charity Fund. The organization is an integral part of this community, due both to its good works and its widely attended extracurricular events. In posting this blog we are not asking for contributions, volunteers or anything else. Instead, we just think it is important – when you are trying to understand an industry – that you know something about the people involved and how the market really connects. Today we talk about this important dimension of the NGL/LPG community.
Wednesday, 3/20/2013
Category:
Renewables
When we described the quirky workings of the US renewable fuels mandates back in July and August of 2012 the topic was merely brain food for commodity market theorists and sleep deprived gasoline analysts. This month the market for big brother sounding “Renewable Identification Numbers” (RINS) - credited to refiners when they add ethanol to gasoline blends - is suddenly the hottest thing since sliced bread. The price of 2013 RINS shot from a few cnts/gal in January 2013 to an astronomical $1/gal on March 8, 2013. Earlier this week they were trading in the stratosphere, at about $0.70/gal. Today we look at what lies behind the current RIN furor.
