trading

As U.S. crude oil expands its foothold across the world, the markets that trade it have undergone some fundamental changes. Since the onset of the pandemic almost four years ago, these changes have included the shortening of the loading-date range for crude oil cargoes marketed along the U.S. Gulf Coast. Price reporting agencies (PRAs) like Argus have responded, launching crude oil assessments that reflect a narrower loading window. In today’s RBN blog, we take a closer look at the changes and the new assessments Argus has rolled out to help crude oil traders manage their market exposure. 

Crude oil, natural gas and NGL production roared back in 2023. All three energy commodity groups hit record volumes, which means one thing: more infrastructure is needed. That means gathering systems, pipelines, processing plants, refinery units, fractionators, storage facilities and, above all, export dock capacity. That’s because most of the incremental production is headed overseas — U.S. energy exports are on the rise! If 2023’s dominant story line was production growth, exports and (especially) the need for new infrastructure, you can bet our blogs on those topics garnered more than their share of interest from RBN’s subscribers. Today we dive into our Top 10 blogs to uncover the hottest topics in 2023 energy markets. 

A little over a year ago, we discussed the rapidly expanding third-party shipper market for crude oil in West Texas. At the time, crude at Midland was trading at nearly a $15/bbl discount to Gulf Coast markets. Pipeline space out of the Permian was hard to come by and extremely valuable, and everybody and their brother — literally, in some cases — were forming a limited liability corporation and trying to secure space as a walk-up, “lottery” shipper. A lot of people made a lot of money, but now, just over a year later, much of that lottery opportunity has dried up. Nowadays, these same folks are looking for new opportunities, or going back to old strategies, only to find that being a third-party shipper today is more expensive and more burdensome. In today’s blog, we recap how lottery shippers made buckets of money in late 2018 and early 2019, only to see their target of opportunity dry up due to midstream investment.

The Permian Basin’s crude oil market over the last 18 months has exhibited so many dynamic changes that dedicated observers may be suffering from a bit of neck strain, if not outright whiplash. We’ve seen production rise at an unprecedented rate, followed by a period of slower growth. We’ve also watched the Permian very quickly transform from a region desperate for new long-haul pipeline capacity to a hotbed for midstream investment and infrastructure growth. While we’ve closely tracked these big-picture changes, a lot of other, smaller-scale knock-on effects have been occurring too, with potentially significant implications for the basin’s supply pricing and transportation economics. Today, we explain why the changing fortunes of Permian crude haulers may benefit producers in the basin.

Every week, traders far and wide watch inventories at the storage hub of Cushing, OK, for insight into the U.S. crude oil market. Cushing has long been the epicenter for crude trading in the U.S., and while that role has shifted as the Gulf Coast gains more prominence, inventories at the Oklahoma hub are still a valuable indicator for traders looking for supply and demand trends. Recently, we’ve seen Cushing stocks drop significantly, declining for 11 straight weeks since the beginning of July to their lowest levels since last Thanksgiving. Today, we review the recent drop at Cushing, and discuss how a few changes in supply and demand fundamentals, plus strong pricing motives, helped drag down stockpiles this summer.

The market is used to crude oil spreads in the Permian Basin being volatile. Fast-paced production growth, the addition of new takeaway pipelines — and the rapid filling of those new pipes — have all impacted in-basin pricing, and we’ve seen differentials from the Permian to its downstream markets — Cushing, OK, and the Gulf Coast — widen and narrow as supply and demand fundamentals have changed. But recently, things have gotten a lot wilder. In September 2018, the Midland discount to WTI at Cushing blew out to almost $18/bbl, then narrowed to less than $6/bbl only three weeks later, thanks largely to the start-up of Plains All American’s much-ballyhooed, 350-Mb/d Sunrise Expansion. As Sunrise started to fill up, price differentials initially widened for a brief period of time. But, as we kicked off 2019, the Midland-Cushing spread quickly shrank further and then flipped, with Midland last Friday (January 25) trading at a $1/bbl premium to Cushing crude. You might wonder, how the heck did that happen? In today’s blog, we discuss how things play out when a supply glut evaporates and traders are suddenly caught in a tight market.

RBN has documented many fundamental influences on crude oil prices including supply, demand and inventory levels as well as infrastructure constraints. One that we don’t often mention is the strength or weakness of the U.S. dollar. As with most international commodities - oil is bought and sold priced in U.S. dollars. As a result, a change in the value of the dollar relative to other currencies has an impact on oil prices. Likewise the dramatic fall in oil prices since June of 2014 has been mirrored by the dollar rising to levels not seen since 2003. Today we look at how oil prices are impacted by the value of the dollar.

The Edmonton region in Alberta is home to a growing crude gathering hub that brings in bitumen crude from the oil sands region 250 miles to the north. In order to get that crude to Edmonton and to markets in the U.S., producers must first blend it with diluent range materials so that it can flow in pipelines. In the early days much of the diluent required in the oil sands was delivered by rail and truck but now a growing “parallel” pipeline network is developing to source and distribute supplies as new production comes online. Today we look at the Edmonton diluent distribution system.

The market for residual fuel oil is traditionally not attractive for refiners because prices are lower than for crude feedstocks. However, some of the world’s biggest oil traders profit from arbitrage between different fuel oil grades and locations. The Gulf Coast market is expected to expand as refiners add imported fuel oil to their feedstocks to balance lighter crudes coming their way from shale production.  In October a brand new fuel oil terminal will open on the Houston Ship Channel to help serve the growing needs of fuel oil traders. Today, appropriately “International Talk-Like-a-Pirate-Day” we begin a new series covering the Gulf Coast fuel oil market.

These days natural gas can be traded in spot, term, or financial at over 120 locations across the US. Deals can be executed by Apps, by instant messages and by high-speed algorithm. And it is reported that a few human beings actually still trade gas bilaterally over the telephone as was done in the time of the Cro-Magnons. None of that would be happening without the big bang. Today we recall how the dust settled after the big bang in natural gas markets.