Saudi Aramco

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. 

Last week RBN co-hosted the “Surviving the Flood” conference with Turner, Mason & Company in Houston. The major theme of the conference was the expected timing and likely impact of a “Day of Reckoning” for the US oil market that could come any time between 2015 and 2020 depending on critical factors influencing market dynamics. If and when the big day arrives, and if export rules don’t change and refinery hardware is not upgraded, Gulf Coast light Louisiana sweet (LLS) crude could be trading at a discount of $15-$20/Bbl to international light sweet benchmark Brent. Today we discuss the day of reckoning and its critical influencers.

It isn’t often that a market measure simultaneously shrinks in quantity and gains in importance, but that is the case for crude oil imports into Gulf refineries this year. Six to nine months ago, traders were predicting the end of imports, and signaling a declining interest in how much foreign crude is still making it into the US. The indifference has turned into keen interest as two trends emerge: A far from smooth decline in total volumes, and a rising correlation between imports and PADD 3 storage.  In today’s blog, we examine these developments and their implications for the market.