In recent weeks, the price differential for Bakken Patoka crude (light sweet crude that is produced in the Bakken Formation in North Dakota and shipped to Patoka, Illinois via the Dakota Access Pipeline ) has strengthened to its highest premium in almost one year (dark blue line in graph below) as discussed in our recent Tradeview Report. Stocks in the Midwest further tightened last week, with inventory levels dropping to three-year lows for the May - July period. Meanwhile, refinery demand in the PADD 2 region stayed strong for the summer months, with utilization nearing 97%.
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What Happened in Wyoming - Crude Differentials Tighten at Guernsey as Demand Rises, Production Ebbs
In the U.S., crude oil trading hubs like Houston, Midland and Cushing get the lion’s share of the market’s attention. But travel a bit further north and you can find one of the more unusual and liquid crude markets in the country — Guernsey, WY — a focal point for producers in Western Canada, North Dakota, Wyoming, Utah and Colorado. Over the last few months, Guernsey differentials have tightened significantly, finally flipping to a premium to Cushing. We have seen this phenomenon occur before, most notably seven years ago after the startup of the Dakota Access Pipeline (DAPL). In today’s RBN blog, we discuss the recent movement in Guernsey differentials and what the future could hold for the often-overlooked sales point.
- Blog
Future(s) Games - How the Futures Market Impacts Physical Crude Oil
On Monday, front-month WTI at Cushing cratered to a negative $37.63/bbl. On Tuesday, the same futures price rose by nearly $48 to close at about $10/bbl — a positive $10, that is. As for WTI to be delivered in June, it lost well over a third of its value on Tuesday, ending up at less than $12/bbl, but over the past two days it has roared back to over $16/bbl. No doubt the WTI futures market will see more wild times in the days and weeks ahead as traders look to avoid the traps that ensnared the market as the May contract approached expiry. If there’s a lesson to be learned from the past week, it’s that it really helps to understand the ins and outs of the futures market — especially when it is so volatile. Perhaps the most important thing to wrap your head around is that while the futures market mostly involves financial players who will never take physical delivery of oil, the two markets — financial and physical — are fundamentally linked. Prompt-month futures converge on spot prices over time, while physical contracts are settled in part based on NYMEX futures, so producers will feel the sting of Monday’s negative prices when physical April deliveries are invoiced. Today, we begin a two-part blog series examining U.S. spot crude pricing mechanisms.
- Blog
Strangers In the Night - WTI and Brent Come Close Enough to Touch
The Brent premium to WTI has traded as wide as $23/Bbl this year but was down to 2 cnts/Bbl on Friday July 19, 2013. At one point during trading nearby WTI prices rose above Brent – the first time that’s happened in three years. Yesterday (July 22, 2013) WTI August expired at 106.91 - $1.14 lower than Brent September. Today we look at why the spread has narrowed so rapidly and whether it will stay that way.
