Crude Oil

Monday, 07/06/2015

The recently (re)announced Kinder Morgan Utica Marcellus Texas Pipeline (UMTP) is that company’s second iteration of a natural gas liquids (NGL) pipeline from Ohio to the Texas Gulf Coast. If built – the project would facilitate delivery of mixed NGLs (y-grade) and purity NGL products from the Utica to the Gulf Coast - where the liquids could be further processed and/or exported. Those purity products could include both plant and lease condensates. But as we discuss today - the project might currently be more attractive to NGL shippers anxious to get better prices for stranded northeast production than it is to condensate producers.

Sunday, 07/05/2015

U.S refiners have been processing a lot of crude so far this summer and utilization rates remain high. Crude production has leveled off and is expected by the Energy Information Administration’s (EIA) Short Term Energy Outlook to decline slightly during the second half of 2015. But the early summer market sentiment that drove crude prices up to $60/Bbl on the back of these fundamentals appears to have lost steam. Today we conclude our analysis of short term crude price prospects.

Thursday, 07/02/2015

Big changes are coming to the markets for natural gas, NGLs and crude oil. Even though production volumes are holding their own – despite 60% fewer rigs running, the days of month-after-month record increases in production are behind us, at least for a while.  But what about all that infrastructure that has been and continues to be built?  Billions of dollars are going into pipelines, processing plants, petrochemical plants, terminals, storage, etc. based on a much higher production growth scenario than now looks likely.  So what happens next?  That issue is the theme of a new RBN conference scheduled for July 23rd in New York City called State of the Energy Markets, and is the subject of today’s blog – also an advertorial for the conference.

Wednesday, 07/01/2015

Over 400 Mb/d of Gulf Coast condensate splitter projects could be online by the end of 2016. These splitters will compete for condensate feedstock with local refineries in the Eagle Ford able to process 475 Mb/d of light crude and condensate. Another 700 Mb/d of stabilization capacity in the Eagle Ford could be used to process condensate for export. But with low crude prices stalling production growth, splitter economics could suffer if demand exceeds supply and condensate prices increase as a result. Today we conclude our update on Gulf Coast splitters.

Monday, 06/29/2015

Production of lease condensate at the wellhead and plant condensate from processing natural gas liquids (NGLs) has increased rapidly in the Ohio Utica over the past two years. Timely investment by local refiner Marathon and infrastructure developments to ship condensate to Gulf Coast refiners have proved the primary market for Utica condensate so far. The proximity of the region to diluent pipelines to Canada has also prompted infrastructure projects. Today we describe projects to deliver condensate to Alberta.

Thursday, 06/25/2015

The latest forecast from the Canadian Association of Petroleum Producers (CAPP) was published a couple of weeks ago. In spite of lower crude prices CAPP continue to forecast growth in Canadian crude output to 2030 – albeit at a slower pace than previously expected. Continued growth means that takeaway constraints getting Canadian crude to market remain a key challenge – even though increased use of crude-by-rail has taken up some of the slack. Today we conclude our review of the 2015 CAPP outlook.

Tuesday, 06/23/2015

Prices for prompt delivery of West Texas Intermediate (WTI) crude as quoted on the CME/NYMEX futures exchange fell by 60% from their high over $107/Bbl in June 2014 to a low under $44/Bbl on March 17, 2015. After recovering about 37% in April and May WTI prices have remained stuck close to $60/Bbl ever since - closing yesterday (June 23, 2015) at $61.01/Bbl. With market contango narrowing, inventory levels falling, and refinery throughputs rising – why aren’t prices moving higher faster?  Today we review the fundamental data.

Tuesday, 06/16/2015

Average margins for a Gulf Coast condensate splitter have been about $5/Bbl better in 2015 than they were in 2014 but are still about $4.75/Bbl worse than an equivalent Gulf Coast 3-2-1 crack spread. The economics of condensate splitters have also yet to be tested in an environment if – as could happen later this year – crude production begins to decline. Are condensate splitters a better investment than just exporting lightly processed condensate under relaxed export regulations? Two companies considering projects seem to have reached different conclusions recently. Today we continue our update on splitter projects with a look at economics.

Monday, 06/15/2015

The latest forecast from the Canadian Association of Petroleum Producers (CAPP) was published last week (June 9, 2015). This annual survey of Canadian crude production, transportation and market demand differs from many forecasts because it is based on surveys of producers and refiners rather than price projections and models. In spite of lower crude prices CAPP continue to forecast growth in Canadian crude output to 2030 – albeit at a slower pace than previously expected.  Today we review CAPP’s production and North American market demand forecasts.

Thursday, 06/11/2015

The boom in U.S. oil and natural gas production has grabbed the headlines the last few years. What shouldn’t be forgotten, though, is that Americans depend on refined petroleum products like gasoline, diesel and jet fuel—not crude—to get from Point A to Point B, and that in some parts of the country, especially the Northeast, fuel oil—not natural gas or electricity—remains the space-heating fuel of choice. Transporting large volumes of petroleum products from refinery to consumer is a monumental and complicated task, a mission accomplished primarily by a still-growing, ever-evolving network of pipelines and storage facilities. Today, we begin a new series on how gasoline, distillate (diesel and heating oil), and jet fuel get to where they’re needed.

Wednesday, 06/10/2015

Two years ago production of super light crude known as condensate in the South Texas Eagle Ford was surging. Most Gulf Coast refineries did not want to process this light material and it was discounted to regular crude. The discounts led to a number of project announcements to build stand-alone condensate splitters – a kind of simple refinery that would process it into refined products. During 2014 these projects were cast into doubt by the easing of condensate export restrictions that appeared to offer a less expensive solution to the condensate challenge. More recently the possibily of declining production could also threaten splitter economics. But splitters are still being built and coming online this year and next – with two new projects announced recently.  Today we review current splitter projects in the light of market developments.

Sunday, 06/07/2015

Expectations for continuing rampant production growth for natural gas, natural gas liquids (NGLs) and crude oil have evaporated in the heat of the price melt-down. Volumes may be holding their own, even with 60% less rigs running, but the days of month-after-month record increases in production are behind us, at least for a while. But what about all that infrastructure that has been and continues to be built? Billions of dollars are going into pipelines, processing plants, petrochemical plants, terminals, storage, etc. based on a much higher production growth scenario than now looks likely. So what happens next? That issue is the theme of a new RBN conference scheduled for July 23rd in New York City called State of the Energy Markets, and is the subject of today’s blog – also an advertorial for the conference.

Thursday, 06/04/2015

Since the start of the shale oil boom in 2011 crack spread margins for Midwest refiners have averaged about $23/Bbl. Once written off refineries on the East Coast have averaged $16/Bbl this year so far (2015) and California refiners are currently enjoying average $24/Bbl crack spreads. Refinery utilization at the Gulf Coast has averaged close to 90% for the past 4 years and 92% in the Midwest. Today we review buoyant margins and operating levels at U.S. refineries.

Monday, 06/01/2015

When the Apollo 13 astronauts realized their oxygen tanks were badly damaged, they famously said “Houston, we’ve had a problem.” Today, this phrase could well describe the U.S. oil and gas industry.  The issue isn’t only today’s low prices, but also the industry’s resilience and its response to low prices.  U.S. producers may have created a price ceiling for the world. Today we reflect on a new age of abundance in U.S. energy markets.

Thursday, 05/28/2015

In just a few months’ time, it’s become easier to get regulatory approval to use unmanned aerial systems—more commonly known as drones—and the number of ways drones can be employed by the oil and gas sector has grown substantially. In fact, drones are getting involved in just about everything: geologic mapping, site surveying, methane detection, pipeline inspection—you name it. Today, we explore how drone use in the energy sector is quickly morphing from geeky to mainstream.