Like the proverbial dog who finally catches the truck he’s been chasing, only to wonder what to do next, midstreamers at long last have brought on enough crude oil pipeline capacity to move Permian barrels to the Gulf Coast. In fact, right now there appears to be more than enough pipeline space, with several pipes flowing less than their capacity. What midstream companies now face is a race to the bottom as their pipelines compete with each other to attract barrels by offering service to Gulf Coast markets at the lowest price — resulting in transportation rate compression. Today, we begin a blog series on the tug-of-war for barrels and its effect on prices.
Crude oil production growth in the Permian Basin has been meteoric. The region’s output has more than doubled since the beginning of 2017, from about 2.1 MMb/d then, to more than 4.6 MMb/d today. As production ramped up, midstream companies scrambled to develop and build outbound pipelines to move those barrels to market, primarily to points along the Gulf Coast for refinery use or exports. As we discussed last year in our blog series All Dressed Up With Nowhere To Go, crude production growth often outpaced pipeline capacity additions, and as a result, oil prices in the basin traded at a discount.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
Midstreamers have finally caught their truck — there’s now more than enough pipeline capacity to handle today’s needs. We can see it in our Crude Oil Permian report, and a couple months ago, when Plains All American’s (PAA) Cactus II pipeline and the EPIC pipeline system were moving toward full operation, we said in our blog, Higher Ground, that the days of “Midland-Magellan East Houston (MEH) basis blowouts may just be water under the bridge.” We even went as far as to say that the spreads might shrink even more than what the forward curves at that time indicated.
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About the song
“Even Flow” was written by Stone Gossard and Eddie Vedder. It is the second song and second single from Pearl Jam’s debut album, Ten. Ironically, the band was never satisfied with the version that ended up on their debut album. Pearl Jam guitarist Mike McCready claims the band did more than 50 takes on the song, to the point that “we hated each other” after such a grind. Released in April 1992, the song went to #3 on the Billboard Mainstream Rock, #21 on the Modern Rock Tracks, and #62 on the Hot 100 charts. Personnel on the record were: Eddie Vedder (vocals), Stone Gossard (rhythm guitar), Mike McCready (lead guitar), Jeff Ament (bass), and Dave Krusen (drums).
Ten was recorded in March and April 1991 at London Bridge Studios in Seattle, with the band working with producer Rick Parashar. Released in August 1991, it went to #2 on the Billboard Top 200 Albums chart. Three singles from the LP made the charts. It has been certified 13x Platinum by the Recording Industry Association of America.
Pearl Jam is an American rock band formed in Seattle in 1990 by Stone Gossard and Jeff Ament. Their former band, Mother Love Bone, came to a quick demise after their lead singer Andrew Wood died of a heroin overdose on the day their album was released. Pearl Jam has had four drummers, up to the inclusion of former Soundgarden drummer Matt Cameron on the skins in 1991. Original members Vedder, Gossard, McCready and Ament have been in the band since its formation. They have released 11 studio albums, 23 live albums, three compilation albums, one EP, and 42 singles and have sold more than 85 million records worldwide. The band has won five American Music Awards, two Grammy Awards, and four MTV Video Music Awards. They were inducted into the Rock and Roll Hall of Fame in 2017. Pearl Jam still records and performs live. Their new album, Dark Matter, drops in April.
