Posted on 08/19/2014 12:55:11 PM PDT by thackney
The gap between crude oil prices in the major trading centers of Midland, Texas and Cushing, Okla. ballooned to $19 Tuesday morning, the widest point this year and second-highest on record.
On Tuesday morning, the price for crude oil hit a low of $77.48 per barrel in Midland. In Cushing, the benchmark pricing point for U.S. crude contracts, the price was $96.48. Worldwide crude prices fell, Bloomberg reported, after Iraqi and Kurdish forces regained control of a key dam in Iraq and slowed the advance of Islamic State militants.
Midland prices are further depressed because production growth in West Texas’ Permian Basin has outpaced the transportation capacity in the region. The resulting supply backlog is forcing prices down.
The $19 discount was the second largest ever recorded. In 2012, the differential spiked to $20 for a short time, then settled back around $15, said Jeff Dietert, managing director with Houston’s Simmons & Co. International.
Permian crude gusher creates wave of pipeline, refinery investments
http://www.hydrocarbonprocessing.com/Article/3369269/Permian-crude-gusher-creates-wave-of-pipeline-refinery-investments.html
The gusher of crude from the Permian Basin has spurred new investments from refinery and pipeline companies trying to take advantage of low prices caused by rising supplies.
Delek US Holdings expects to expand its refinery in Tyler, Texas, by 25% in early 2015, and Sunoco Logistics asked shippers if they wanted to commit to a new pipeline to carry West Texas oil across the state and into southern Louisiana.
The projects underscore the continued influence of the shale boom on the US energy landscape more than five years after hydraulic fracturing and horizontal drilling helped reverse a decades-long decline in oil production.
“There’s like a wall of crude oil coming out of the Permian,” said David Hackett, president of Stillwater Associates, an Irvine, California-based energy consulting firm. “The first projects look like they’re all filled up, now the next wave is getting announced.”
The Permian Basin in West Texas and New Mexico is the largest oil field in the US. It’s expected to produce 1.63 million bpd of oil in August, up 86% from August 2008. The rapid increase has caused prices in the Permian hub of Midland, Texas, to slump to $11.50/bbl below the US benchmark in Cushing, Oklahoma, from a discount of 35 cents a year earlier, according to data compiled by Bloomberg.
Wide Differentials
“The growing production has exceeded pipeline development, which we think will continue to result in periods of wide Midland/Cushing crude differentials,” Jeff Stevens, chief executive officer for Western Refining, said April 5 in an earnings call. Western operates a refinery in El Paso, Texas.
Delek wants to refine more of that cheap oil at its plant in Tyler, 100 miles (160 kilometers) east of Dallas. It plans to increase crude capacity there by 15,000 bpd to 75,000 in the first quarter of 2015, the company said in its quarterly earnings statement. The refinery gets 92% of its crude from West Texas now, the company said in an investor presentation.
The plant will also expand sulfur-removing systems to increase gasoline production by 18% to 41,000 bpd and low-sulfur diesel and jet fuel output by 27% to 33,500 bpd. Total cost of the expansion will be $70 million.
Sunoco announced an open season for companies to make binding commitments to ship crude on the Permian Longview and Louisiana extension pipeline. The line would take 100,000 bpd from Midland to Longview in northeast Texas and then 80,000 bpd to Anchorage, Louisiana. The project, which would use some existing pipelines, would be ready to start operating in the second half of 2016.
gas prices:
Los Angeles area: ~3.70
New York City: ~3.60
Dallas: ~3.10
Houston: ~2.99
If you are in Houston, take a picture of a Gas station with < 3.00 prices!
I haven’t seen that in 3 years!
I need diesel to get back to to $3 or lower that would be awesome.
The Eldorado, AR refinery is the old Lion Oil facility.
http://en.wikipedia.org/wiki/Lion_Oil
If you’re ever through Smackover, this is an interesting stop.
Where is that famous soothsayer, Jimmy Carter, one of those super intelligent Democrat presidents that the media slobbers over, who predicted the USA would run out of oil by the year 2000?
Thanks
I think he gave us until 2010...
Isn’t the price differential a direct result of government policy. Who can undo that?
Well, if the gov doesn’t lower taxes, then lower gas prices is one way to spur economic growth and activity.
Price difference in the same grade of oil located in Midland, Texas versus Cushing, Oklahoma? No. In my opinion, it is caused by the quick rise in oil production in Texas versus the existing pipeline capacity. We have new pipelines in progress for this increased oil production. But they are not all completed yet.
Per·me·ann is how I've heard it.
Is it to far out of the question that the Permian Basin could possibly produce 3 millions of barrels of oil in 5 years ?
At the current rate of increase, it would be producing 3 million barrels per day in just under 3 years. I think that is a reasonable estimate.
I think longer become far too much guessing. What is the price going to be? What other areas are producing and at what cost? How much demand has moved to natural gas? etc...
Would now be the time to invest in it ? buy some stocks ?
Understanding the industry and predicting related financial markets are two very different things. I try on the first. I learned the second the hard way.
Thanks. It’s hard to separate normal market forces when the government is so entangled in an industry.
Here is a short article that gives a perspective about why investing in an oil company that has great oil production potential isn’t the same as great money production potential.
http://energypolicyforum.org/2014/08/13/the-shale-sugar-lick/
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