Crude Oil Prediction 2018
- Thread starter radha00027
- Start date
At $300/bbl you'd have quite the wealth transfer to RED States. Imagine those monthly royalty checks...
Hey Mav... I don't understand this (from today).
"Meanwhile, Brent's premium over WTI futures remained near three-year highs above $10 a barrel. The premium has doubled in less than a month, as a lack of pipeline capacity in the United States has trapped a lot of output inland".
Why would the lack of pipeline capacity drive down the price? Wouldn't that make it go up?
Zany, they are talking about the premium in the spread differentials. For example, the WTI/Brent spread has blown out the last month from -5 dollars to close to -12 dollars. That means WTI is trading 12 dollars cheaper than Brent. WTI in Midland is even cheaper right now, it's trading about 20 pts below Brent. The reason for this IS pipeline capacity. We are drowning in oil mid continent but it's called stranded oil, meaning we can't move it. Oil has no value if it's stranded. Oil, as with all energy only realizes it's value at the end user. So we have pipelines from Cushing, OK and Midland, TX that take oil into the Gulf. Where then it can travel on a dirty cargo ship across the atlantic. This is known as the Arb. Buying cheap oil at Cushing, moving it to Europe and delivering it into a brent contract after some slight modifications in the grade. If you can buy oil at X and deliver oversesas and sell it for Y then you will profit if the marginal cost of transport is less than the difference between X and Y. Right now we can't do that. We don't have enough capacity. So.....the next move is to use rail which is more expensive. If the spread gets wide enough, now you can use rail to move the oil to the Gulf. If the spread gets even wider we can finally use trucks. They are VERY expensive and VERY slow but if the spread is wide enough, people will truck it to the gulf.
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Read on DallasNews.com: https://www.dallasnews.com/business...rillers-waiting-new-pipelines-going-long-wait
Great article.
