Upside Down - Why Condensate Flipped From Cheap to Pricey, And Why It May Flip Back

The combination of rising condensate demand as new splitter capacity came online and falling conde supply resulted in just what you’d expect — higher conde prices. Worse yet for the companies that made throughput commitments for those new splitters, the once-favorable price differentials between conde and light-crude benchmarks West Texas Intermediate (WTI) and Louisiana Light Sweet (LLS) have been turned on their heads, and a number of splitters are operating at far less than capacity. Today, we continue our look at the roller-coaster world of conde, this time focusing on conde prices and differentials, and on the forces that may change the conde market once again.

Crude oil and condensate are categorized by their API gravity (API standing for American Petroleum Institute), which is a measurement scale (in degrees) of a petroleum liquid’s specific gravity — the lighter or less dense the crude, the higher its API gravity number (see our Drill Down Report, Blinded by the Lights). Superlight crude oil and condensate (or, as it’s commonly called, conde) is at the far end of the crude-oil spectrum, with an API gravity of 50 to 55 degrees for superlight and more that 55 degrees for conde (according to the gravity breakdown used by the Energy Information Administration, or EIA, in its Crude Oil and Lease Condensate Production by API Gravity data series). As we said in Part 1 of this blog series, superlight crude and conde can either be refined, exported or blended with heavier crudes — or (for conde) run through a splitter. A splitter uses atmospheric distillation to separate conde into its component fractions to produce intermediate, semi-finished blend stocks like naphthas and distillates that are processed further at refineries.

Superlight crude and condensate are produced in a number of U.S. shale plays, including the Permian, SCOOP/STACK and the Niobrara/Denver-Julesburg (DJ) Basin, but high-API-gravity crude is most closely associated with the Eagle Ford region in South Texas, where at one point as much as 45% of the crude produced had an API gravity of 50 or more. As we said in Part 2, U.S. production of superlight and conde rose steadily from 2010 to early 2015 to a peak of about 1.1 MMb/d (about 800 Mb/d of that from the Eagle Ford), but then fell by more than a third to about 700 Mb/d in 2017, with Eagle Ford production of 50-API-or-higher crude falling by half (to about 400 Mb/d).

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