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Midland discount deepens on Permian output.

2017-04-19

OPEC and its partners are cutting output, and other producers have yet to hit full stride after a limited recovery in oil prices. Meanwhile, production from the Permian basin in the western part of the US state of Texas is booming, having scarcely missed a beat through the downturn. Little wonder, then, that Permian crude should be trading at a deeper discount, with WTI at Midland falling to $1.65/bbl below the benchmark at Cushing—its lowest in nearly two years. "Aggressive Permian production growth alongside regional refinery outages and weaker export demand for shale crude has forced heavy discounts for Midland crude," said Energy Aspects analyst Dominic Haywood. "It's now falling towards levels that's making it economical to ship on certain pipelines on a spot basis."

But the Permian is not the only place where production is rising. According to North Dakota's Department of Mineral Resources, production from the Bakken broke back through the 1MM b/d barrier in Feb., rising from 981K b/d in in Jan. to 1.03MM b/d. "I was anticipating a drop in February and got a surprise here," said DMR Director Lynn Helms. "I think we're going to ride the roller coast down as much as up." He did say that while production should exhibit "very aggressive" growth in the summer months, the data will probably show that production declined in April and March as the state has to put weight restrictions on trucks while the ground is thawing, slowing activity.

The US Energy Information Administration (EIA) said on April 11 that it expects crude production in the country to rise to 9.22MM b/d in 2017 and then to 9.9MM b/d in 2018, up by 20K b/d and 680K b/d, respectively, from its previous forecasts. By 4Q 2018, the agency said, production could rise to 10.1MM b/d—a mere 30K b/d shy of the record set in 2017.

EIA also increased its forecast for US oil demand growth in 2017, from 210K b/d previously to 250K b/d. For 2018, demand is expected to increase by only 340K b/d, however, down from 380K b/d forecast earlier. (April 11, 13)


Source: Worldwide Refining Business Digest Weekly.e, April 17, 2017.


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