Permian crude oil markets are getting interesting again, with triple-digit prices making daily headlines and boosting producers’ cash flows. But there have been few parties in the Permian oil midstream space. There, excess long-haul capacity has been the story for some time, a situation that became more pronounced when Wink-to-Webster (W2W) — the last of the new greenfield pipelines to the Texas Gulf Coast — started up earlier this year. There’s so much capacity in place that price spreads have remained tight and competition for barrels has been fierce. That said, there’s a positive story flying under the radar in the Permian oil markets. One of the new pipelines that started up out of the Permian in 2019 is now full. That may surprise some folks, kind of like when the Texas A&M Aggies pulled in the #1 football recruiting class in the country earlier this year. While Alabama’s coach is apparently still trying to swallow that news, you’re not likely to find yourself doubting the ability of a newbuild to get full in today’s competitive environment. At least you won’t after we tell you the story of the EPIC Crude Pipeline, which we do in today’s RBN blog.
Brace yourself for it. Over the next few weeks, there’s a good chance that a tsunami of crude oil will be released from the U.S. Strategic Petroleum Reserve (SPR), and it’s likely that much (if not most) of that oil will be piped to Gulf Coast export docks and loaded onto supertankers. If that happens, the export capacity of crude-handling terminals from Corpus Christi to coastal Louisiana will be stress-tested on their ability to send out much larger volumes than they’re used to dealing with. And that’s only the beginning. Over the next year or two, while U.S. E&Ps ratchet up production in response to higher prices as Europeans and others scramble to replace Russian crude oil, Gulf Coast export terminals may well be called upon to load and ship out even more oil (in addition to refined products) on a regular basis. In today’s RBN blog, we discuss the impending SPR releases and the ability of Gulf Coast ports and individual terminals to handle increasing volumes.
Vladimir Putin’s fateful decision to invade Ukraine and the ongoing brutality have made Russia a pariah state to many leading hydrocarbon-consuming nations, which in turn has caused cuts in Russian crude oil production and exports. That raises a few important questions, chief among them the degree to which other producers — including the U.S. and the non-Russian members of OPEC+ –– can ramp up their production and displace Russian oil. U.S. output has been increasing recently, albeit only gradually, and production could rise much more quickly under the right circumstances. But if it does, would there be enough crude export capacity available along the Gulf Coast to handle, say, another 500 Mb/d or 1 MMb/d? In today’s RBN blog, we examine the ability of key U.S. export facilities to stage, load and ship out increasing volumes of oil.
The battle lines were drawn. The drive toward decarbonization was rushing headlong into the reality of energy markets. Things were going to get messy, but at least it was becoming more evident how the energy transition would impact key market developments, from the chaos in European natural gas, to producer capital restraint in the oil patch, to the rising impact of renewable fuels and, of course, the escalating roadblocks to pipeline construction. Then, a monkey wrench was thrown into the works. The world was confronted with the madness of war in Europe, with all sorts of consequences for energy markets: sanctions, boycotts, cutbacks, strategic releases, price spikes and, here in the U.S., what looks to be a softening of the Biden administration’s view against hydrocarbons — at least natural gas and LNG. So now the markets for crude oil, natural gas and NGLs aren’t only inextricably tied to renewables, decarbonization and sustainability, they must navigate the transition turmoil under the cloud of wartime disruptions. It’s simply impossible to understand energy market behavior without having a solid grasp of how these factors are linked together. That is what School of Energy Spring 2022 is all about! In the encore edition of today’s RBN blog — a blatant advertorial — we’ll highlight how our upcoming conference integrates existing, war-impacted market dynamics with prospects for the energy transition.
Increases in crude oil and gasoline prices have caused widespread concern in recent months, made worse after Russia’s invasion of Ukraine that added even more uncertainty to the market. With the average U.S. price for regular gasoline now topping $4/gal — nearly 50% above where it was a year ago — the rising fuel costs have been especially painful for everyday drivers and threaten to slow or derail a global economy still recovering from the pandemic-induced recession. Government officials in the U.S. and elsewhere, while urging oil producers to ramp up output, have turned to their strategic reserves as a way to quickly balance the market and rein in prices. In today’s RBN blog, we look at the International Energy Agency’s (IEA) latest announced release from oil reserves, how the global drawdowns are intended to create a bridge to when increased production comes online, and the skepticism about whether those plans will work out as intended.
The battle lines were drawn. The drive toward decarbonization was rushing headlong into the reality of energy markets. Things were going to get messy, but at least it was becoming more evident how the energy transition would impact key market developments, from the chaos in European natural gas, to producer capital restraint in the oil patch, to the rising impact of renewable fuels and, of course, the escalating roadblocks to pipeline construction. Then, a monkey wrench was thrown into the works. The world was confronted with the madness of war in Europe, with all sorts of consequences for energy markets: sanctions, boycotts, cutbacks, strategic releases, price spikes and, here in the U.S., what looks to be a softening of the Biden administration’s view against hydrocarbons — at least natural gas and LNG. So now the markets for crude oil, natural gas and NGLs aren’t only inextricably tied to renewables, decarbonization and sustainability, they must navigate the transition turmoil under the cloud of wartime disruptions. It’s simply impossible to understand energy market behavior without having a solid grasp of how these factors are linked together. That is what School of Energy Spring 2022 is all about! In today’s RBN blog — a blatant advertorial — we’ll highlight how our upcoming conference integrates existing, war-impacted market dynamics with prospects for the energy transition.
At first glance, it would appear that President Biden’s announcement regarding the release of up to 180 MMbbl of crude oil from the Strategic Petroleum Reserve over the next six months could have a significant impact. After all, it would, in a sense, increase the flow of U.S. oil into the market by almost 9% –– 11.7 MMb/d of current U.S. production plus an incremental 1 MMb/d from the SPR — and boost global supply by about 1%, which is no small thing. There are a few unknowns, though, such as (1) how much sweet crude oil and how much sour will be released, (2) where the pipelines connected to the four SPR sites could take that oil, (3) whether those pipelines have sufficient capacity to absorb the incremental flows out of SPR, and (4) what the ultimate market impacts of the SPR releases will be. In today’s RBN blog, we look at the president’s announcement and its implications.
Just a few years ago, when the Shale Revolution had matured into the Shale Era, the world settled into a nice groove, with crude prices generally rangebound between $40 and $70/bbl. As the U.S. looked to assume OPEC+’s role and evolve into the world’s swing supplier of oil, ramping up production when prices rose and slowing it down when they fell, it seemed reasonable to expect that market-driven responses would help maintain stability. Well, things haven’t turned out that way. COVID, the emphasis on ESG, a hydrocarbon-averse administration, and Russia’s war on Ukraine combined to put “reasonable expectations” in the trash. An entirely new set of expectations is emerging, and few metrics explain it better than today’s different-as-can-be relationship between crude oil prices and the U.S. rig count, as we discuss in today’s RBN blog.
There’s a lot of confusion out there — both in the media and the general public — about how producers in the U.S. oil and gas industry plan their operations for the months ahead and the degree to which they could ratchet up their production to help alleviate the current global supply shortfall and help bring down high prices. It’s not as simple or immediate as some might imagine. There are many reasons why E&Ps are either reluctant or unable to quickly increase their crude oil and natural gas production. Capital budgets are up in 2022 by an average of 23% over 2021. That increase seems substantial, but about two-thirds (15%) results from oilfield service inflation. And there are other headwinds as well. In today’s RBN blog, we drill down into the numbers with a look at producers’ capex and production guidance for 2022, the sharp decline in drilled-but-uncompleted wells, the impact of inflation and other factors that weigh on E&Ps today.
Getting by without a few million barrels a day of Russian crude oil won't be easy for the global market, but it's gotta be done. One way to help ease the supply shortfall would be for U.S. E&Ps to ramp up their crude oil production, but the oil patch's output has remained close to flat — so far at least. Why aren't producers jumping in? Are the Biden administration’s policies and mixed messages on hydrocarbons putting the kibosh on production growth? Is it a scarcity of completion crews, or pipes or frac sand? Perhaps it’s worries that increasing production would send oil prices sliding and hurt producers’ bottom lines? Or is it all about ESG and the shift by many large investment funds and banks away from anything related to fossil fuels? Possibly all of the above? In today’s RBN blog, we look at what’s really behind the snail’s pace of U.S. crude oil production growth.
The world is in desperate need of more crude oil right now and anybody with barrels is scouring every nook and cranny for any additional volume that can be brought to market. Some of that may come from increased production, but the oil patch is a long-cycle industry, just coming off one of the most severe bust periods ever, and it will take time to get all the various national oil companies, majors, and independents rowing in the same direction again. For now, part of the answer will be to drain what we can from storage — after all, a major purpose of storing crude inventories is to serve as a shock absorber for short-term market disruptions. To that end, the U.S. is coordinating with other nations to release strategic reserve volumes to help stymie the global impact of avoiding Russian commodities. Outside of reserves held for strategic purposes though, commercial inventories have already been dwindling as escalating global crude prices have been signaling the market to sell as much as possible. Stored volumes at Cushing — the U.S.’s largest commercial tank farm and home to the pricing benchmark WTI — have been freefalling for months, which raises the question, how much more (if any) can come out of Cushing? In today’s RBN blog, we update one of our Greatest Hits blogs to calculate how much crude oil is actually available at Cushing.
Russia’s war on Ukraine turbocharged global crude oil prices and spurred price volatility the likes of which we haven’t seen since COVID hit two years ago. The price of WTI at the Cushing hub in Oklahoma — the delivery point for CME/NYMEX futures contracts — has gone nuts, and the forward curve is indicating the steepest backwardation ever. In other words, the market is telling traders in all-caps, “SELL, SELL, SELL! Sell any crude you can get your hands on. It’s going to be worth far less in the future.” So anyone with barrels in storage there for non-operational reasons is pulling them out, and fast! In today’s RBN blog, we look at the recent spike in global crude oil prices and what it means for inventories at the U.S.’s most liquid oil hub.
WTI is selling for north of $120 a barrel, gasoline and diesel are retailing for more than $4.10 and $4.80 a gallon, respectively, and, with Russia continuing its unprovoked war against Ukraine, it’s hard to imagine prices for hydrocarbons easing by much anytime soon. As startling as the recent spikes in crude oil and refined products prices may be, however, it’s worth keeping in mind that, in real-dollar terms, prices for these commodities have been considerably higher in the past, including through much of the 2006-14 period and back in 1979-81. And don’t forget, the car, SUV, or pickup you’re driving today consumes about two-thirds as much fuel per mile, on average, as the vehicle you (or your parents) drove back when Ronald Reagan was running for president and Pink Floyd’s The Wall was the best-selling album. In today’s RBN blog, we put today’s “record-breaking” prices for crude oil and motor fuels in perspective.
Russia’s unprovoked war against Ukraine has posed a dilemma regarding Russian crude oil. Russia is the world’s second-largest oil exporter after Saudi Arabia, sending out an average of more than 7 MMb/d last year, or about 7% of global demand. And the world needs more oil — demand for crude has rebounded from its COVID lows, and OPEC+ (of which Russia is part) and U.S. producers alike have been ramping up production only gradually. So the dilemma is, does the U.S. continue importing Russian crude oil to help hold down gasoline, diesel, and heating oil prices, or does the U.S. ban such imports as an additional rebuke to Russia’s actions in Ukraine? In today’s RBN blog, we look at which refiners and refineries have been importing Russian crude oil, heavy gasoil, and resid and what would happen if the U.S. said “Nyet” to Russian imports.
Well, it took a hot war in Europe, constrained capital spending by U.S. producers, continued restrictions in OPEC+ production, and ongoing economic recovery from a global pandemic, but it’s finally happened: Brent shot past $100 and even $105/bbl Thursday before dropping in the last hour of trading to settle a hair above $99. Even WTI touched $100/bbl briefly. The market has been buzzing about the prospects for the breach of this threshold since October, coming along with waves of speculative trades, a dozen false starts, and countless pundit predictions. Now that it has happened, what does it mean — other than higher gasoline prices, of course? In the good ole days, high prices would spur production growth that would help bring prices back down — eventually. But this time, things are different. Which begs the #1 question: Will triple-digit oil prices last? In today’s RBN blog, we’ll consider these issues in the context of historical price behavior and what we might expect this time around.