Mars

In the early 2000s, prices for West Texas Intermediate (WTI) were becoming increasingly disconnected from global fundamentals. WTI reflected conditions in the Midcontinent at the Cushing, OK, crude oil storage hub, where bottlenecks repeatedly distorted its value. In today’s RBN blog, we look at how the problem contributed to the creation of the Argus Sour Crude Index (ASCI) 16 years ago, how the index has evolved and whether it remains relevant today. 

Guyana’s rise as a crude oil producer in recent years can only be described as meteoric. If forecasts from some of the most respected international agencies pan out, the South American country’s output may soon rival some of the world’s biggest offshore producers. But the developments there are not without some controversy: they’re the centerpiece of a dispute over the proposed Chevron-Hess merger, while neighboring Venezuela claims that much of Guyana’s oil reserves are actually within Venezuelan territory. In today’s RBN blog, we’ll take a deep dive into Guyana’s production, examining its grades, quality and export flows as it transforms into a major global supplier. 

Very Large Crude Carriers offer economies of scale and are the oil transporters of choice for shippers moving massive volumes of crude from the U.S. Gulf Coast to distant customers in Europe and Asia. VLCCs also can serve as cost-effective floating storage — in the current contango market, a growing number of these 2-MMbbl behemoths are being used to stockpile crude until its value increases in the coming months. VLCCs can be loaded to the gills through reverse lightering at a number of deepwater points off the coast of Texas, but only one facility, the Louisiana Offshore Oil Port, can fill the supertankers to the brim at the port itself. LOOP also can receive fully loaded VLCCs, of course, and another ace up its sleeve is its 72 MMbbl of cavern and tank storage a few miles inland at Clovelly, LA. Today, we continue our series on Gulf Coast export facilities with a look at LOOP.

Last year, the impending implementation of International Maritime Organization’s rule mandating the use of lower-sulfur marine fuels starting January 1, 2020, widened the price spread between rule-compliant 0.5%-sulfur bunker and the 3.5%-sulfur marine fuel that has been a shipping industry mainstay. Traders’ thinking was that demand for high-sulfur bunker would evaporate in the run-up to IMO 2020, as the new rule is known. But since early January, the spread between low- and high-sulfur fuel at the Gulf Coast has narrowed from nearly $11/bbl to less than $2/bbl. The culprit is a shortage of heavy-sour crude caused by a number of factors. Today, we begin a two-part series on low-sulfur vs. high-sulfur fuel and crude values as IMO 2020 approaches.

The St. James, LA crude trading hub provides feedstock to 2.6 MMb/d of regional refining capacity as well as refineries in the Midwest. St. James is also an important distribution hub for crude from North Dakota, South Texas, the Gulf of Mexico and onshore Louisiana as well as imports arriving at the Louisiana Offshore Oil Port (LOOP). Crude storage and midstream infrastructure at St. James has been expanding in recent years as the trading hub handles larger volumes of domestic production. Today we begin a new series looking at infrastructure and crude pricing at St. James.

Work continues on several major deep- and shallow-water crude oil production projects in the U.S. Gulf of Mexico (GOM), despite the fact that oil prices are far lower than they were when the commitments to develop these projects were made. U.S. benchmark West Texas Intermediate (WTI) crude for prompt delivery closed yesterday on the CME/NYMEX futures market at $26.55/Bbl – its lowest level since May 2003 – threatening to strangle resilient domestic onshore shale production. Yet GOM production levels will rise again this year--and likely for at least another couple of years—offsetting some of the expected decline in onshore U.S. crude output.  Today, we continue our examination of steadily rising crude output in the GOM with a look at projects coming online in 2016 and beyond.

The Louisiana Offshore Oil Port (LOOP) is the nation’s largest waterborne crude oil import terminal. Capable of handling 1.2 MMb/d of crude throughput and with associated storage topping 67 MMBbl, LOOP is connected by pipeline to 50% of the nation’s refineries. As shale crude and increasing Canadian imports rush toward the Gulf Coast pushing out waterborne imports, the terminal needs to redefine its future.  Today in the first of two blogs on LOOP we look at how the port operates today.

Permian crude production is experiencing a renaissance. This month (September 2012) Bentek estimated current production at 1.3 MMb/d. Most of that production not absorbed by local refineries is shipped to Cushing or further into the Midwest where prices are depressed versus the Gulf Coast. New takeaway capacity projects look to change that balance towards the Gulf Coast over the next two years. Today we explore how West Texas crude prices will be impacted by access to the Gulf Coast.