Back in 2015, U.S. production of superlight crude oil and condensate had been on the rise for five years, driven primarily by boom times in the Eagle Ford shale play in South Texas. Condensate was selling for several bucks-a-barrel less than light-crude benchmark West Texas Intermediate (WTI), the U.S. government had recently approved the export of minimally processed condensate, and new condensate splitters were being built to allow refineries to use more high-API-gravity liquids. Fast forward to now, though, and production of superlight crude and conde is off by one-third — the lighter the material, the steeper the decline — a barrel of conde is selling for several dollars more than WTI and a lot of those new splitters are running at far less than full capacity. As for exports of neat conde, they’ve dropped to almost zero, and whatever superlight crude and conde that is being exported goes out as part of blended crude. But things could be about to change again, possibly in a big way. Today, we begin a new blog series on the chaotic U.S. conde and superlight crude market.
Any discussion of superlight crude and condensate needs to begin with definitions, or at least attempts at definitions. First of all, crude oil isn’t a single commodity — instead, there’s a wide spectrum of crude oil types that emerge from wells, ranging from molasses-like, high-sulfur heavy crude to easily poured, sweet (or low-sulfur) superlight crude. And then there’s field (or lease) condensate, commonly called conde (rhymes with Gandhi), which is even lighter, more like cream soda. As we said in our Drill Down Report, Blinded by the Lights, crude oil and condensate are categorized by their API gravity (API standing for American Petroleum Institute), which measures (in degrees) a petroleum liquid’s density relative to water — the lighter or less dense the crude, the higher its API gravity number. We should note that each and every type of crude has value; the most complex refineries have the sophisticated equipment to break down the heaviest, sourest (highest-sulfur) crudes into gasoline, distillate and other refined products, and simpler refineries (with fewer bells and whistles) consume lighter, sweeter crudes.
Just like there’s a lot of disagreement in Houston about where to find the best barbecue, Tex-Mex food or craft beer, there is no real consensus on where to draw the API-gravity line between light and superlight crude, or between superlight and condensate. For instance, some say superlight crude is 45 API or higher; some say 50 and up. While we will not take sides in debates over Houston’s best BBQ, fajitas or local brew, we will (for this blog series) define superlight crude as oil with API gravity of 50.1 to 55.0 degrees, and condensate as having API gravity of 55.1 or higher — sometimes as high as 70. These categories fit with the API gravity categories for crude collected by the Energy Information Administration (EIA).
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