During 2018, U.S. crude oil, natural gas and NGL production hit new all-time highs almost every month. Oil production grew by a staggering 1.7 MMb/d from January to December, an increase of about 18%. NGLs soared even more: by 27%, up 1.0 MMb/d over the same 12-month period. Natural gas production zoomed skyward by 10 Bcf/d, a gain of about 13%. All this new supply came on in a price environment marked by wild swings. WTI ran up from $60/bbl to $75, then collapsed below $50. Henry Hub gas spiked to nearly $5/MMBtu, then beat a hasty retreat back to the $3/MMBtu range. Permian gas traded negative. Ethane prices blasted to the moon (62 c/gal), then crashed back to earth (below 30 c/gal). Is this the way it’s going to be? Massive production growth, extreme price volatility, widespread market uncertainty? It’s impossible to answer such a question, right? Nah. All we need to do is stick our collective RBN necks out one more time, peer into our crystal ball, and see what 2019 has in store for us.
2018 Track Record
We’ve posted an annual RBN Prognostications blog each of the past seven years. Like most New Year’s Top 10 lists we start at #10 and work our way up to #1. And to keep us honest, part of the tradition is to look back at how we did the previous year — this time in the Top Ten RBN Prognostications for 2018, posted one year ago today — on January 2, 2018. For the most part, we feel pretty good about our market calls back then. Here’s the 2018 Prognostications report card.
- In the regional gas-on-gas wars, the winner is Henry Hub. We expected that constrained pipeline capacity would put downward pressure on pricing in essentially all areas outside the Gulf Coast, and that’s just what happened. The only points consistently averaging above Henry during the year were end-of-pipe hubs in New England and the West Coast.
- In the regional crude market wars, the loser is Cushing. Here we postulated that the Cushing hub would cede some of its pricing dominance to the Gulf Coast, and that is happening (see The Race is On). We did a lot of blogging and reports on Cushing in 2018, making the point that the WTI benchmark is still the gold standard of U.S. crude pricing. But there is no doubt that most U.S. crude wants to go to the export and refining markets along the Gulf Coast, and that is a trend that will continue to move the focus of crude pricing to that region in the coming years.
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About the song
"When Pigs Fly" is a song performed by Ryan Adams on Sandra Boynton's Frog Trouble CD. It accompanies Boynton's illustrated songbook of the same title. The 12-song CD was mostly recorded in Nashville, and features Adams, Mark Lanegan, Brad Paisley, Dwight Yoakam, Alison Krauss, and others. Boynton is an American humorist, songwriter, and children's author and illustrator. Frog Trouble’s songs were all written by Boynton and composer Michael Ford. The album was released in September 2013, and is touted as being for audiences "age one to older than dirt." Boynton said that she and co-writer Ford were so concerned that Adams would turn down their request to sing a song on a children's album that they wrote "When Pigs Can Fly" — a song about impossible dreams — specifically for him. They were thrilled when Adams agreed to do it. His vocals were recorded at his Pax-Am Studio in Los Angeles. Ryan Adams is an American singer-songwriter, musician, record producer, and poet. He has released 16 solo albums, and three with his former band, Whiskeytown.
Comments
I enjoy the richness of the text but a lot of the predictions are too ambiguous. For instance, the number one prediction. What does it mean, numerically, to dominate pricing?
In reply to I enjoy the richness of the by g p
Thanks for the feedback. Unfortunately we have to save those details for our clients. That's how we are able to provide the blog for free!
Is there a blogpost or series thereof in 2018 or 2h 2017 that outlined what you thought might happen post-ME2 ramp (assuming there are outcomes other than just bad for retail propane)? Thx, George
In reply to ME2 inside/out by George Clark
We did several consulting engagements in 2018 that addressed the impact of ME2 on the Northeast NGL market, especially propane. Some of that work was referenced as a side note on blogs focused on Conway NGLs. We also covered the impact of the ME2 delay in our twice-monthly NGL Voyager report. Unfortunately nothing in a blog series.