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The expected startup of Plains All American’s expanded Sunrise Pipeline in early November will ease constraints on the oil bottleneck in the Permian Basin adding near 500,000 bpd capacity, seeing WTI Midland’s discount collapse to just $2.50 per barrel.


WTI Midland 10 18 18

Image: via Reuters

MidlandWTI crude prices are the strongest in the spread in almost seven months. WTI Midland fell to the widest in six years at a discount as high as $18.25 per barrel in late August. It is rumored to even traded much wider with buisness to business deals between some of the more 'captive' producers.

The Sunrise extension will add about 500,000 barrels per day of capacity from Midland to Colorado City and Wichita Falls, Texas, and provide connections to Cushing. This will ease the bottleneck from the record crude production from shale being held up in the regiom

Front-month U.S. West Texas Intermediate (WTI) crude futures traded at the biggest discount to the next month in nearly a year on Friday. The price has also been affected by a heavily long speculative holding over Iran and banks and hedge funds spruiking $100 oil keeping it at a premium for a long time.  Other factors include option expiration and heading into futures expiration there has been a margin influenced un winding of positions coupled with large Cushing builds.

U.S. crude for delivery in November traded as much as 17 cents per barrel lower than futures for delivery in December, the biggest discount since Nov. 20, 2017. The spread slipped into contango, a structure where nearby prices trade lower than far-dated prices, on Thursday for the first time since May 22.

US Crude 10 18 18 graph

Image via teven Kopits of Princeton Energy Advisors LLC

North American crude Friday October 20 2018 Closes:

  • WTI Futures - $69.12
  • Brent Futures- $79.85
  • LLS (Cash) - $78.40
  • WTI(Hou) - $76.10
  • WTI(Midland)- $65.50
  • ANS (PNW) -$79.60
  • Canada(WCS) -$25.12
  • Canada(Light)- $44.10
  • Bakken - $65.00

In theory trading in the spread typically reflects supply and demand at Cushing. The contango is across the WTI forward curve through to April/May next year.

Midland crude or MEH traded at $9.50 below WTI at East Houston Thursday, coming in from a high of $23.75 in early September. This price factors in transporting crude to the U.S. Gulf Coast.

Source: Reuters, TradersCommunity

From the TradersCommunity Research Desk

 

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