posting

Permian basin oil production rose above 1 MMb/d last year (2011) for the first time since 1998, after sliding from a 1973 peak of 2.1 MMb/d. A lot of new Permian production uses conventional drilling and enhanced oil recovery techniques, but horizontal drilling is making its mark as well. The West Texas crudes this basin produces are sold the same way as any other except they have their own futures contract trading 60 MMb/d. Today we turn the RBN spotlight onto the Permian Basin.

West Texas Intermediate (WTI) is the benchmark price for essentially all crude produced in the U.S.  But few crudes are actually priced at the WTI level.  Most are subject to some kind of discount based on location, quality or competitive conditions.  And that means that producers and royalty owners rarely realize a WTI price.

Last Friday we began to delve into crude oil pricing in the Bakken by explaining crude oil postings. Today’s blog is the second in a series designed to uncover how crude is priced, what the transportation costs are and how refiners determine the profitability of processing one crude versus another. In Part II of our tutorial on crude oil pricing, we compare posted prices with the pipeline hub trading markets for Bakken crude at Clearbrook, Minnesota and Guernsey, Wyoming.