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It's All Too Much - The Top 10 RBN Blogs of 2019: Supply, Exports and Low Prices

December 2019 U.S. crude oil production soared 1.1 MMb/d above this time last year to 12.8 MMb/d. It’s a similar story for natural gas, with Lower-48 production climbing to 95 Bcf/d, up 6 Bcf/d over the year. That’s a little off the breakneck growth rate of 2018, but still quite healthy, even in the context of Shale Era increases. And it all happened in the face of continued infrastructure constraints, crude prices that fell from the mid-$60s/bbl in April to average $55/bbl from May through October, and gas prices that in several months were crushed to the lowest level in 20 years. It’s all too much supply to be absorbed by the U.S. domestic market. And that means more pipes to get the supply to the Gulf Coast and more export facilities to get the volumes on the water. What has all this meant for the market’s response to these developments? Well, at RBN we have a way to track that. We scrupulously monitor the website “hit rate” of the RBN blogs fired off to about 28,000 people each day and, at the end of each year, we look back to see which topics generated the most interest from you, our readers. That hit rate reveals a lot about major market trends. So, once again, we look into the rearview mirror to check out the top blogs of the year based on the number of rbnenergy.com website hits.

This year our Top 10 includes topics ranging from new petrochemical plants, lower-cost frac sand, a shuttered refinery, a major new regulation impacting marine bunker fuel, more LNG/LPG/crude oil export terminals, and a host of new pipelines. At first glance, these topics don’t seem to have much in common. But, in fact, they are all driven by — or at least impacted by a single factor — supply. Too much of it. It’s quite a revolutionary notion for those of us who grew up in the industry in an era of shortages. So let’s see what the top blogs of 2019 can tell us about this development, and what we might expect in the coming year. Just like any year-end Top 10, we’ll start with #10 and work our way up to #1.

Here are the Top 10 blogs of 2019 (in reverse order, by number of hits):

#10 – 7/8/2019 – NGLs: Reason to Believe – Why Build an Ethane Steam Cracker?

During the first half of 2019, petchem (steam cracker) margins were in the doghouse. Even ethane, usually the most attractive feedstock from an economic perspective, had seen negative margin values in 2018 and languished at about 5 cents/pound (c/lb) during the first half of 2019. A big part of the problem was the price of ethylene, the primary petchem yielded from cracking ethane. Several new crackers that had been in development for years were finally coming online, increasing the supply of ethylene and pushing the spot price lower. So what does the petrochemical industry do? Build still more crackers, of course. In fact, the world’s largest cracker. When we posted this blog in July, ExxonMobil and SABIC’s joint venture — Gulf Coast Growth Ventures (GCGV) — had just announced a new 4.0-billion-pound/year, ethane-only cracker near Corpus Christi. To make a multibillion-dollar commitment like this, these two heavy-hitters must believe that U.S. ethane will be cheap and plentiful for decades into the future. In other words, lots of new supply. At RBN, we agree. And these companies have more than enough downstream petrochemical capacity to soak up most of the plant’s output, minimizing their exposure to low spot ethylene prices.

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