WTI $71, but Crude in West Texas Only Goes for $60?

[dowmike + 37]

Interesting piece in WSJ today: 

While WTI is $71, crude in West Texas is actually going for $60 because of a pipeline bottleneck. Love to hear some insight from the oilpros on this. 

https://www.wsj.com/articles/heart-of-americas-oil-boom-cant-fetch-good-prices-for-its-crude-1525968441

[cryptocurator + 17]

me too, i'm not following the price point here ... above my pay grade

[Tom Kirkman + 8,860]

3 hours ago, dowmike said:

Interesting piece in WSJ today: 

While WTI is $71, crude in West Texas is actually going for $60 because of a pipeline bottleneck. Love to hear some insight from the oilpros on this. 

https://www.wsj.com/articles/heart-of-americas-oil-boom-cant-fetch-good-prices-for-its-crude-1525968441

Any Oilpro alumni with a WSJ subscription want to take a crack at this?  Or anyone else?  Bueller?  Bueller?  Bueller?

I don't have a subscription to WSJ, and can only see the intro blurb to the article, so I have to sit this one out.

[Guillaume Albasini + 851]

Another article on the pipeline bottlenecks in West Texas :

https://www.forbes.com/sites/rrapier/2018/04/05/the-permian-basins-looming-bottleneck/#17547b1d50a8

Also adressing the impact on the electricity grid :

"Excessive demand on a limited system also threatens the grid’s reliability in West Texas, and could lead to blackouts caused by the voltage overload. "

[Eric C. Alldritt + 18]

If I were an investor in the US Permian right now, I would be questioning even the short-term economic returns. Source EIA Short-Term Energy Outlook, May 2018. 

URL link: https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf

 

[lwpcolonel + 1]

It's About Gaining or Losing an 'Arbitrage Advantage' & Determining its $$ Worth!

There is something going on now, especially in the Permian referred to as "Destination Optionality". In reality, this is a matter of multiple "break-in-bulk" points required to create the ideal pathway for any given operators particular needs. The needs are based on whether the Upstream operator has a predetermined contracted destination for his crude or if the operator is attempting to find the highest bidder in terms of transit costs which are becoming akin to a airline Connecting Flight where miles and volumes often add to the per unit cost. That's especially true when its 'from' an interior site (away from established direct connection availability or simply off the grid) and a specific receiver, such as 'Cushing' or 'Houston' gets a premium whereas 'Corpus Christi' would bring a better price and that's better.

I have never made a comment here so this is a minimal one that hopefully doesn't brake any rules. If anyone has any question I was a career Strategic Planner and Logistics was among my responsibilities especially for strategic materials. I am also a lifelong mostly energy investor and live mostly from dividends and capital gains. Thank you, lwp

[lwpcolonel + 1]

The Centurion Pipeline Is Just 1 of Many Pipelines Crisscrossing the Permian!

 

There are many pipelines both in existence and under construction in the and around the Permian. For instance, the Centurion Pipeline brings what use to work out as, discounted "Mid-Continental" crude oil via multiple egress points onto a transportation system owned by Occidental. This provided Occidental with an "Arbitrage Advantage" as Crude Oil.

 

--- Fast Facts: from Occidental Petroleum

 

1- Approximately 2,900 miles of active pipelines
2- Approximately 127 truck unloading facilities
3- Primary transportation hubs are strategically located in Midland, Texas and Cushing, Oklahoma

 

About Centurion Pipeline L.P. Source Occidental

 

Centurion Pipeline L.P., a wholly-owned subsidiary of Occidental Petroleum Corporation, is an oil fixed-fee per barrel tariff common carrier pipeline operator with approximately 2,900 miles of pipeline extending from southeast New Mexico across the Permian Basin of West Texas to Cushing, Oklahoma. Targeted destinations for the crude oil are market centers, third party connecting carriers, and ultimately, refineries. A fixed-fee per barrel tariff is charged on gathering and transporting crude oil. Our customers include producers, marketers, refineries and shipper.

 

Some of the Arbitrage Advantage has been Temporarily Mixed Up:

 

The description above from Occidental's website explains how they manage to turn a Midstream asset into an "Arbitrage Advantage". Usually when looking at the spot prices, further up the Centurion Line, away from the ports and refineries one sees progressively lower prices. This is less the case today than was usually the case as the Permian bottleneck is the disadvantaged product now due to a temporary lack of easy access to best advantaged marketplace.

Map of the Centurion Pipeline [from Occidental Website http://www.centurionpipeline.com/about/map.aspx

[lwpcolonel + 1]

Current Image of Permian Pipelines Mapped

Source:
 file:///C:/Users/lwpco/OneDrive/Pictures/RBN_PermianDD-171115_Preview.pdf
 
Figure 1 - Takeaway Pipelines Out of the Permian; Source: RBN As crude oil production has ramped up in the Delaware and other high-growth parts of the Permian over the past few years, new regional networks of pipes have been built to gather and shuttle crude to takeaway pipelines. In many cases, these pipelines are designed to provide that all important destination optionality. This report details many of the key gathering systems and shuttle pipelines systems providing this capability to the Permian market

[Boat + 1,324]

The EIA shows around 100 more drilled but uncompleted wells added this month. This is besides the fact they are losing big bucks because of overwhelming pipeline takeaway. Not being in the oil business apparently I have much to learn because this seems crazy to me.

A question. Why is the rig count the holy Grail of oil reporting when completions seems more relevent/accurate as a guage to future production.

[Eric C. Alldritt + 18]

28 minutes ago, lwpcolonel said:

Current Image of Permian Pipelines Mapped

Source:
 file:///C:/Users/lwpco/OneDrive/Pictures/RBN_PermianDD-171115_Preview.pdf
 
Figure 1 - Takeaway Pipelines Out of the Permian; Source: RBN As crude oil production has ramped up in the Delaware and other high-growth parts of the Permian over the past few years, new regional networks of pipes have been built to gather and shuttle crude to takeaway pipelines. In many cases, these pipelines are designed to provide that all important destination optionality. This report details many of the key gathering systems and shuttle pipelines systems providing this capability to the Permian market

That is only 2.89 million bpd of pipeline capacity as shown above and as shown on the EIA chart below (https://www.eia.gov/petroleum/drilling/pdf/permian.pdf), Midland is currently producing roughly 3.25 million bpd. Thus a deficit of 360,000 bpd. As well as the chart below this one, showing that Permian oil production alongside pipeline capacity remaining tight and that is assuming the "Proposed additions" come as scheduled (http://blogs.platts.com/2017/10/02/permian-pipelines-production-growth/). The bottom graph was created in October 2017, does anyone know a more up-to-date chart?