Wide Crude Price Differentials - Double Digit Deja Vu?
HOUSTON, June 5, 2018 /PRNewswire/ -- The multi-disciplinary global fullstream energy research team at Stratas Advisors is releasing a new analytical series of drilldown research analyses for the advisory firm's service subscribers.
"With so much energy focused on looking at global crude prices and variables, we feel the emerging dynamics in US markets are being dangerously overlooked, analogous to what was happening in late-2013 early-2014," said Ashley Peterson, Senior Oil Market Analyst. "Midstream dislocations are a crucial variable to North American pricing and will likely have knock-on effects for the global story."
Entitled "Wide Crude Differentials Setting In," the first in the series shares the Stratas Advisors team's insights on U.S. crude oil price discounts to global crude benchmarks. These gaps are widening as a result of strong crude production growth that faces limited midstream logistics expansion, refilling storage hubs, and already-peaked downstream refining runs.
"Strong growth from the Permian will drive domestic production above 11 MMBbl/d by yearend 2018. Notably, the majority of wells contributing to December's projected production are already producing," said Stephen Beck, Senior Director, Upstream. "Given the average time from drilling to first production is at least five months, changes in rig counts will do little to change the course we're on."
"Crude price differentials are already nearing peaks unseen since earlier years of this decade. We expect these wider U.S. crude differentials to last for the next few years, widening through 2018 and slowly moderating in 2019 before narrowing in 2020," said Greg Haas, Director, Integrated Energy.
In this first part of the series, published May 31, Stratas Advisors lays out expectations that oil storage capacity at the Cushing hub could refill with new unconventional and shale production by year-end, which could take WTI prices at Cushing lower before year-end relative to the global market benchmark, Brent Dated.
"We see these wider differentials as a floor lasting through the end of 2019 when sizable new takeaway pipelines begin filling and sending light crude to Texas export facilities. If downside crude demand (export or US refinery), logistical upsets, or higher-than-expected production growth occurs, we would not be surprised if the WTIc discount to Brent revisits the $20+ range seen the last time brimming Cushing tanks and limited takeaway caused differential blowouts in the earlier years of this decade," said Haas.
To receive these limited series insights, please visit StratasAdvisors.com. To sign up for future actionable insights or reach out for a comment from Stratas Advisors' experts, contact Greg Haas, Ashley Peterson and Stephen Beck.
About Stratas Advisors
Stratas Advisors, a Hart Energy company, is a leading global consulting and analytics provider for upstream, midstream and downstream energy markets and related sectors, such as automotive; transportation; power; petrochemicals and heavy industries. Stratas Advisors' team of experts provides data and strategic insights to companies seeking to understand key drivers shaping development. Stratas Advisors' consultants and analysts offer forward-looking perspectives to help energy decision makers leverage opportunities, mitigate risk and implement strategies. Stratas Advisors is headquartered in Houston with offices in Brussels and Singapore. To learn more about their offerings, visit StratasAdvisors.com.
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