Thursday, February 23, 2012
Crude oil production from the Utica and Bakken production areas in the U.S., in addition to increasing oil supply from Canada, are expected to add significant supply to the U.S. Midwest market and contribute to frequent periods of regional oversupply and distressed prices at Cushing relative to the Brent international benchmark.
EVERGREEN, CO (February 23, 2012) – BENTEK Energy, a leading energy markets information and analytics company, projects the West Texas Intermediate (WTI) to Brent international crude oil price differential will average minus $14 over the next five years. That compares to the current WTI futures discount to Brent (April 2012-16) of roughly minus $6.20. BENTEK’s Crude Awakening: Shale Boom Hits Oil forecasts WTI tumbling to a discount of nearly minus $18 this year before rebounding in 2013 and 2014. The rebound is expected in reaction to the construction of several pipeline expansions between Cushing and the U.S. Gulf Coast, including Seaway and Keystone XL. Despite these capacity addi¬tions, supply growth is expected to substantially outpace pipeline and refinery increases and lead to the return of deep WTI price discounts to Brent in 2015 and 2016.
“The rollercoaster ride that the WTI-Brent price spread will experience over the next five years is due to transportation and refining constraints, not the quality of the crude,” noted Adam Bedard, BENTEK Senior Director, Energy Analysis. “Increasing Midwest supply and downward pressure on regional prices have led to a growing incentive to move more oil from the Midwest to the Gulf Coast. As traditional flow patterns are altered and the value of crude transportation capacity is realigned, WTI-Brent and regional price differentials will feel the effect.”
BENTEK’s Market Alert reports that Midwest crude oil supply will double during the 2011-16 period, growing nearly 808,000 b/d by 2016. BENTEK projects the crude oil production growth will include increases of 547,000 b/d in the Williston-ND, 97,000 b/d in the Anadarko and 131,000 b/d in the Utica (Appalachia-OH). Despite these massive supply gains and six currently announced Midwest refinery expansions, crude oil demand from regional refineries is projected to grow only 3% or 108,000 b/d during this time. Consequently, regional oil prices are projected to remain deeply depressed.
BENTEK’s Market Alert, Crude Awakening: Shale Boom Hits Oil, provides a comprehensive review of the U.S. oil market and its potential growth over the next five years, including industry challenges and implications. This Market Alert details current drilling and production activity in the most dynamic U.S. and Canadian oil plays, including five-year production forecasts. The PADD 2 section of Crude Awakening: Shale Boom Hits Oil includes in-depth analysis of historical and projected supply within the PADD and trends in key Midwest production areas such as the Williston, Anadarko and Utica. Analysis on existing and future Midwest transportation infrastructure, regional demand and a five-year WTI market outlook is also included in the Market Alert.
For more information about BENTEK’s Crude Awakening: Shale Boom Hits Oil Market Alert or BENTEK’s full line of Crude Oil Production Monitors, go to www.bentekenergy.com or call 1-888-251-1264.