Way back when—before 2012—few outside a small cadre of oil producers and marketers paid any attention to condensates, or even knew they existed. Then two events shook the condensate world. First came rapid growth in the Eagle Ford, where crude oil production turned out to be almost half condensates. Then the Department of Commerce started allowing condensate exports while maintaining the ban on international sales of mainstream crude oil. Suddenly condensates were the star of the show. But like the careers of one-hit rock & roll wonders, the stardom didn’t last long. The crude oil price crash hit Eagle Ford hard, resulting in a disproportionate decline in condensate production. Congress then sent condensates further back into obscurity by removing the export ban for all crude oil in December 2015, eliminating any special status for the product. That was the end of the road for the condensate story, right? Wrong. Because during condensate’s day in the sun, billions were spent on pipelines, stabilizers, splitters, export facilities and refinery modifications, all focused on providing new markets for condensates. Oops. Today we consider how the next chapter of the condensate saga will play out.
Posts from Rusty Braziel
U.S. crude oil prices languish below $50/bbl, but the oil-directed rig count is up by 90, an increase of almost 30% over the past 12 weeks. Natural gas production is down less than 1% from the all-time high hit back in February even though the price of natural gas remains below $3/MMbtu. The price spread between U.S. propane and international markets is far below a level that should justify exports, but LPG exports to overseas markets continue at astronomical levels –– approaching 700 Mb/d, most of which is propane. What’s wrong with this picture? Why does it seem that relationships between energy production, demand and prices have broken down, or at least have undergone some fundamental shift? That is what our upcoming School of Energy Fall 2016 is all about. Warning: Today’s blog includes a commercial for our upcoming Houston conference, scheduled for November 2 and 3 at The Houstonian Hotel.
U.S. propane production from natural gas processing has doubled over the past five years, but domestic demand has hardly moved the needle. So the only way the propane market has balanced is through exports, and it is no overstatement to say that the ship has really come in for U.S. propane exporters. All those exports have also helped support the U.S.
This week the first Gulf Coast ethane export cargo will depart Morgan’s Point, Enterprise Products Partners’ new export terminal on the Houston Ship Channel. This is a history-making event for at least three reasons. First, it inaugurates ethane exports from the Gulf Coast, only five months after the first-ever U.S. overseas ethane exports out of Sunoco Logistics’ Marcus Hook, PA, terminal. Second, it launches a battle for Mont Belvieu ethane, to be fought between ethane exporters and new ethane-only steam crackers (ethylene plants) that will be coming online along the Texas/Louisiana coast over the next couple of years. And third, Morgan’s Point is not just another export terminal. It is a location steeped in Texas history, known in the 1830s as New Washington, with an important role in the Battle of San Jacinto – decisive battle of the Texas Revolution -- and legend has it, inextricably tied to the Texas anthem “The Yellow Rose of Texas.” In today’s blog we examine the upcoming fight between ethane exporters and U.S. crackers.
“Condensates are long and you can’t give them away … No, things have changed – condensate supply is tight and prices are running up relative to WTI … But wait wait, the oversupply is back and prices are down again.” No wonder the market’s love for condensates has faded. It’s a liquid hydrocarbon that is being buffeted by every force the market can bring to bear: declining production, lots of new committed infrastructure (stabilizers, pipelines, and splitters), wide-open export markets, volatile crack spread splitter economics -- the list goes on. Adding to this whirlwind is the fact that historically there has been limited analytical data to work with, with most condensate information buried deep inside crude production numbers from producer investor presentations and less-than-revealing Energy Information Administration (EIA) crude oil reports. But we have some new tools to help understand what’s going on, including the EIA’s new 914 crude quality data and condensate export numbers from ClipperData. Today, we continue our exploration of rapidly evolving condensate markets.
Few segments of the energy market have experienced the roller-coaster ride that U.S. condensates have been on over the past five years. Prior to 2011, U.S. condensates were a forgotten backwater of the hydrocarbon complex, mostly blended off into crude oil. Then condensates rapidly transitioned from obscurity to an oversupplied, price-discounted growth market, then to a driver of massive infrastructure investment, then to the star of the show as the only member of the U.S. crude oil family that could be exported. By mid-2014, producers and midstreamers were in love with condensates. Exports were legal and growing. New pipeline, splitter, stabilizer and export dock infrastructure was coming online. U.S. condensate markets were tightening and condensate prices were increasing. Then in one fell swoop in December 2015, Congress swept away all export restrictions on crude oil, potentially relegating U.S. condensates back to the obscurity from whence they came.
On Monday, September 3, 2007, dignitaries and thousands of Panamanian citizens watched a huge explosion level a hill near Paraiso, a village north of Panama City. That day launched work on a project that would eventually cost more than $6 billion (U.S.) to double the capacity of the Panama Canal and allow for the passage of longer and wider ships. Nearly nine years later on June 26, 2016, the expansion is finally scheduled to be open for business. The new canal capacity will be a major event in global energy markets, especially for growing volumes of U.S. natural gas, liquified petroleum gas (LPG) and petroleum product exports. In honor of this historic development, RBN will take you there! Rusty will be traversing the canal this Thursday, April 14th and will have the skinny on what is happening in Panama right now, with pictures to show for it. In today’s blog we set the stage for our voyage across the Panamanian Isthmus.
In the five weeks since February 11, the price of WTI crude oil on the CME/NYMEX spiked 50%, up from $26/bbl to $40/bbl (see black dashed circle in Figure #1). For hedge funds that took long positions in February, it was an awesome trade. And for beleaguered producers, it was certainly a bit of good news. But there are no celebrations in the streets of Houston and Oklahoma City. The fact that $40/bbl should be considered “good news” is sobering: Eighteen months ago, that price level would have been seen as a catastrophe for the producing community. In fact, it still is. In today’s blog we examine the factors that help push prices above $40/bbl and what it will take to really get US production growing again.
Energy markets are in turmoil. Prices have been crushed, energy producers are under stress, and consumers are enjoying a bonanza of savings. In the midst of this turmoil, the elections are on the horizon. The stage is set for 2016-17 to be transformative years for the energy industry. But what kind of transformation will it be? Well, it depends. On lots of things. Prices. Supply/demand. OPEC/no-OPEC. And of course, the outcome of U.S. elections. The elections, and the positions (or lack thereof) taken by candidates during the campaign will be bellwethers of the market the industry will face over the next two years and beyond. Today in Brace for Impact - of the 2016 Elections on Energy Policies, Politics and Markets we set the stage for a new kind of conference being hosted by RBN, Sutherland, and Goldwyn Global Strategies on May 10th in Houston. Warning, today’s blog is an advertorial for the conference.
Energy market volatility in 2015 was neither the result of random market fluctuations nor geopolitical orchestration. The market pressures had been building for years, as one market event triggered another, leading inexorably to the carnage of Q4 2015. In fact, there were thirty such market events, which are represented by dominos in the new book by Rusty Braziel, titled The Domino Effect now Amazon’s #1 bestselling book in four categories. More dominoes will topple in 2016 and the years b
2015 was a transformational year for the U.S. shale revolution. Act I of the Shale Revolution is now behind us. We’ll look back at the first decade -- 2005-2015 as the halcyon days – when there was always another market just around the corner. Shale started with dry gas in Texas, but those prices were crushed by the economics of wet gas and NGLs. In just a few years, that market too was annihilated, but economically attractive Appalachia dry gas and the big kahuna, crude oil took center stage. Now after a year of being beaten senseless by low prices, it is clear that those markets too have succumbed to the scourge of shale oversupply. That’s the end of Act I. There is nowhere else for producers to turn. The market dynamics facing Act II of the shale revolution are unprecedented. There is simply no way to predict what is going to happen next. Right? That’s silly. Of course we can! It is the perfect time to roll out RBN’s crystal ball one more time for 2016 - Year of the Monkey. Yup, there is more monkey business coming to energy markets.
Energy markets will long remember 2015. For producers and midstreamers, the memories won’t be pleasant. But it was not all bad news. Particularly if you happen to be an energy buyer or refiner. As we’ve done for the past four years, today is a day for looking back over the past twelve months in the RBN blogosphere – to see which blogs have generated the most interest from you, our readers. We track the hit rate for each of our daily blogs, and the number of hits tells you a lot about what is going on in energy markets. So once again we have taken a page out of the late Casey Kasem’s playbook to look at the top blogs of 2015 based on numbers of website hits.
What do you do when prices are in the cellar, hundreds of rigs are idle, production growth has evaporated and the whole industry seems to be wondering how the numbers are going to work. Well of course, it’s time to head back to school to understand the new realities of energy markets. That is what School of Energy Spring 2016 is all about. This is nothing like other natural gas, crude oil or NGL conferences! The course work is hands-on. In each module we’ll drill down on an important aspect of the market, explain how it works, download spreadsheet models and learn how to use them. This time we’ve added more models than ever, crunching the numbers that explain everything from production economics to petrochemical margins in the context of today’s prices. You walk out the door with the how-to Powerpoints and the Excel models on your hard drive. Warning - today’s blog is a blatant commercial for our upcoming Houston conference.
Did you miss our School of Energy a few weeks back in Houston? Not a problem! The entire School of Energy conference is now available online in streaming video format. The conference video, presentation slides and spreadsheet models are available for purchase as individual Modules or as a full conference package. It’s the next best thing to being there! School of Energy is unlike other natural gas, NGL or crude oil conferences. It combines all three! And the curriculum includes a comprehensive analysis of current energy markets and in-depth instruction on how to use RBN spreadsheet models covering everything from production economics to gas processing. We walk through key developments for each of the three hydrocarbons including the increasingly important links between them. Fair warning – today’s blog is a blatant advertorial.
For nearly two months -- Since late July -- WTI crude oil prices have averaged $45/bbl, never once closing above the $50/bbl mark. Over the same period, the natural gas price at Henry Hub has averaged $2.70/MMbtu and now languishes $.20/MMbtu lower. Is this a time to be wallowing in misery and self-pity? Absolutely not!! This is the time for midstreamers and producers to reposition their businesses with a laser-like focus on the opportunities that low prices have served up. There are bargains out there in the oil (and gas) patch. If producers are in the right locations, with drilling costs much lower than last year, there is good money to be made. And likewise, opportunities abound for midstreamers to pick up assets at very attractive prices to get that production to market. But to execute such a strategy, you must have a rock-solid understanding of what is really going on in today’s markets for crude oil, NGLs and natural gas. Our goal for the upcoming State of the Energy Markets Conference scheduled for October 28, 2015 in Denver, CO is just exactly that - to give you a rock-solid market knowledge based on hard data and thorough analysis. Today’s blog is an advertorial for the conference.