(January 3, 2014 - Seeking Alpha) RBN Energy's Top Predictions For 2014 (By: Michael Fitzsimmons)
RBN Energy has established itself as a top firm when it comes to analyzing energy commodities and managing risk. The company regularly publishes relevant blogs and provides consulting services. Rusty Braziel, RBN President, recently released the firm's Top 10 Energy Predictions for 2014. Considering the company's excellent track record with respect to its 2013 market calls, energy investors should give it a close read and take notes. The overall theme of RBN's research outlook for 2014 isdemand: what will be done with all of the hydrocarbons being produced in the US? I will touch on a few of RBN's top 2014 prognostications and link them to companies that could be affected.
#1: Gulf Coast and International oil markets will decouple and get "weirder."
RBN agrees with the general conclusions I reached in Crude Oil Export Ban Pits Shale Producers Vs. Refiners: there is downside risk to WTI prices. RBN believes that Gulf Coast light-sweet will likely trade at a discount to imported heavy in 2014. I think this has already happened on occasion. What is the price of Bakken at the rail terminals or at Clearbrook? What is WCS trading at with respect to WTI? These typically trade at substantial discounts to WTI, yet are not widely reported. When will Bloomberg or Reuters start publicly reporting these benchmarks on dedicated webpages as they do Brent and WTI? I mean WTI is almost irrelevant to me these days. But I digress. The point is RBN's call could mean pain for refiners running heavy crude slates having to compete with those running advantaged crude slates. This means margins could come under pressure at refineries such as Motiva's Port Arthur refinery - the largest refinery in the US at 600,000 bbl/day. Motiva is a 50/50 joint venture between Saudi Aramco and Royal Dutch Shell (RDS.A) (RDS.B) and primarily processes imported Saudi heavy.
#2: US and International LPG markets link as the US ramps up exports.
RBN reports that if all the current projects are built export capacity of liquid petroleum gases such as propane and butane could exceed 1.4 million boe/day. As a result, domestic LPG prices will rise closer to international prices. Great for producers, not so much for domestic consumers. Enterprise Products (EPD), Targa (NGLS) and ETP Sonoco(ETP) have all expanded export facilities. Phillips 66 (PSX) has announced plans to build an LPG export terminal in Freeport, TX, with an export capacity of 4.4 million boe/month.
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