On Friday (January 22, 2016) West Texas Intermediate (WTI) crude prices on the CME/NYMEX futures exchange closed up $2.66/Bbl – the second day of a recovery from their 28% plunge during the first 20 days of 2016. The jury is still out on whether the recovery will be sustained. There was a similar (though less pronounced) price decline a year ago in January 2015 that did not last very long at the time. But in comparison the price destruction during this month’s collapse was unusually severe - not just because we saw prices under $30/Bbl for the first time since 2003. Today we explain why the extent of the price destruction along the forward curve this time suggests that last week’s recovery may be short lived.
Daily Energy Blog
Wednesday, 1/20/2016
Work continues on several major deep- and shallow-water crude oil production projects in the U.S. Gulf of Mexico (GOM), despite the fact that oil prices are far lower than they were when the commitments to develop these projects were made. U.S. benchmark West Texas Intermediate (WTI) crude for prompt delivery closed yesterday on the CME/NYMEX futures market at $26.55/Bbl – its lowest level since May 2003 – threatening to strangle resilient domestic onshore shale production. Yet GOM production levels will rise again this year--and likely for at least another couple of years—offsetting some of the expected decline in onshore U.S. crude output. Today, we continue our examination of steadily rising crude output in the GOM with a look at projects coming online in 2016 and beyond.
Monday, 1/18/2016
Crude prices have fallen 21% since the start of 2016 and may fall further with the end to Iranian sanctions threatening to release yet more supplies into a saturated market. The U.S. benchmark West Texas Intermediate (WTI) closed at $29.42/Bbl Friday (January 15, 2016) and is now down 78% since the price rout began in June 2014. What has changed in the past two months to make crude prices fall so fast this year? Today we begin a two-part discussion of the fundamental factors underlying current weakness in the crude market.
Tuesday, 1/12/2016
The recent end to U.S. crude export prohibitions opens up a number of coastal infrastructure development opportunities. One of the best placed assets is Louisiana’s Offshore Oil Port (LOOP) – the largest U.S. waterborne crude receipt terminal. LOOP could become a Gulf Coast crude blending and trading hub if its infrastructure is upgraded to facilitate exports. Today we look at the existing LOOP operation and future opportunities for exports.
Monday, 1/11/2016
Crude oil production is off in most U.S. shale plays and at today’s prices will continue falling, but offshore Gulf of Mexico (GOM) output is resurging like a genie and it looks like 2016 will be another solid year. That means, with existing GOM wells producing at full throttle and new offshore production due online, U.S. production as a whole is down by less than you might expect, given that oil prices are stuck well under $35/Bbl. Today we begin a review of the resilience of GOM oil production, efforts to reduce costs, and new projects coming online.
Thursday, 1/07/2016
The race to load the first freely exported U.S. crude cargo was won by NuStar’s Corpus Christi terminal, edging out Enterprise’s Houston terminal, as the Theo T set sail for Italy on New Year’s Eve with Eagle Ford crude and condensate on board. Midstream companies are now set to fiercely compete, not just for bragging rights but for terminal fees, as more U.S. crude heads overseas. But where exactly will that crude go? With oil prices tracking below $40/Bbl and narrow differentials prevailing between U.S. and overseas crudes, breaking into new markets will be tough. Today we outline which markets are most likely to absorb U.S. crude supply.
Monday, 1/04/2016
Following the news that regulations restricting the export of U.S. crude had been lifted, West Texas Intermediate (WTI) crude rallied to a slight premium over its international counterpart Brent for 6 days at the end of December 2015 – apparently leveling the playing field between the two rival light sweet grades. Is this the green light for a surge in U.S. crude exports? Not hardly. In fact, it is the other way around. Prices for WTI need to be well below Brent for exports to make economic sense and – according to the futures market – that is not happening anytime soon. Today we conclude our analysis of the Brent/WTI price relationship with a look forward to 2016.
Tuesday, 12/29/2015
Although the current narrow price differentials between U.S. domestic crude (including Eagle Ford condensate) and international market prices suggest no flood of exports is likely in the short term, the considerable existing marine dock capacity at Corpus is already capable of shipping out over 750 Mb/d of crude and condensate and is still expanding. That could make Corpus a major center of crude exports going forward. Today we conclude our series with a look at infrastructure in the Ingleside area of Corpus Christi and preview our final Drill Down report for 2015 that provides deeper analysis and commentary on Corpus Christi infrastructure.
Sunday, 12/27/2015
Next week (January 2016 - according to press reports) Enterprise Products Partners will load the first cargo of U.S. crude oil to be exported without regard to the regulations that restricted such movements to most countries except in certain circumstances for the past forty years. It looks like the lifting of crude oil export restrictions came too late to have much impact on U.S. production or prices in an era of free falling prices. Today we look at the impact of the change on the crude price spread between U.S. benchmark West Texas Intermediate (WTI) and international counterpart Brent.
Wednesday, 12/23/2015
In the new world where unencumbered crude exports are permitted, Corpus Christi holds a lot of strong cards as a major hub for shipping crude oil and lease condensate to international markets. Crude and condensate shipments out of Corpus have gone through the roof since 2012 as production in the close-by Eagle Ford soared. Pipelines offer producers direct routes to marine docks that currently ship crude to domestic refineries but could just as easily serve international customers. Today, we continue our look at Corpus’s emerging role as a crude oil/condensate hub with a review of existing and planned storage and marine dock facilities.
Monday, 12/21/2015
Until last week (December 13, 2015), the infrastructure being built to handle crude and condensate in the South Texas Port of Corpus Christi was planned on the assumption that crude exports were restricted to specific locations like Canada and condensate exports required special processing in a stabilization unit. Now that Congress has lifted restrictions on crude exports - the floodgates would appear to be open for surplus Eagle Ford and Permian crude to ship to overseas markets – provided the economics justify such movements (which they don’t at the moment). In the longer term though, exports could be the key to Corpus’ future. Today we continue our look at Corpus’s emerging role as a crude oil/condensate hub in a new world without export regulations.
Thursday, 12/17/2015
We don’t expect to see a flurry of U.S. crude shipments overseas following the expected lifting of the decades old U.S. ban on exports by Congress this week. That’s because the price spread between U.S. crude benchmark West Texas Intermediate (WTI) and international equivalent Brent is currently trading at less than $2/Bbl – providing no economic incentive to cover the freight cost of shipping U.S. crude abroad. However, longer term the end of the export ban expands the market options for U.S. crude producers. In that context, well-developed pipeline connections between South Texas Eagle Ford oil and condensate production and the Port of Corpus Christi bode well for future export opportunities.
Tuesday, 12/15/2015
With the bottom falling out of the crude oil market these days there is one basin where production continues to grow – the West Texas Permian. The sweet spots in the play’s Midland and Delaware basins are still the center of new drilling and production. As a result producers are looking for infrastructure to ship crude (and increasingly – condensate) to market. So while the midstream business has taken a beating in financial markets lately – there are still signs of life in the field. Today we round out our series on new Permian gathering systems with a look at two brand new projects.
Monday, 12/14/2015
Corpus Christi has emerged as an important crude refining and distribution market hub for Eagle Ford and Permian Basin crude and lease condensate. Corpus has a lot going for it: it’s close to--and well-connected by pipeline with--the Eagle Ford, it has new and potentially growing connections with Permian; and Corpus and its environs boast considerable crude/condensate storage, refining and processing capacity, as well as one of the nation’s busiest ports. Today we continue our review of Eagle Ford crude/condensate pipelines feeding Corpus including Kinder Morgan, NuStar, Magellan and Harvest pipelines.
Wednesday, 12/09/2015
Overall oil prices and the differentials between the world’s different benchmark crude grades have been on a rollercoaster ride over the past decade. In the last eighteen months - since June 2014 – rising production of U.S. shale crude together with oil producer cartel OPEC’s decision not to curb output in response - have led to significant worldwide supply and inventory surpluses that are hurting producers and providing a windfall to many refiners. Today we review a new report from Turner Mason & Company that offers a detailed analysis of global crude oil supply and demand drivers and pricing over the next 10 years.
