TPH: “…We believe, by the end of fourth quarter, the remainder of Brent imports will be pushed out of the Gulf by domestic supply….”
Tudor, Pickering, Holt & Co. Securities Inc., making note of the growing action in the spread this week, reported Thursday, “Brent-WTI spreads could remain relatively tight through the end of summer as seasonal demand, new outbound pipelines and backwardation continue to spur Cushing draws.”
The DOE reported Wednesday a draw of 6.9 million barrels in the prior week from non-Cushing storage and 900,000 barrels from Cushing, the analysts note. This followed a 20-million non-Cushing draw and 2.7-million-barrel Cushing draw the previous week.
Also, the draw on gasoline was 4 million barrels.
The next DOE report will be released Wednesday, 10:30 EDT. The analysts suggest, “Tune in next week at the same bat time on the same bat channel.”
While WTI has been working its way up to overcome Brent, the price for both has been growing since mid-May. “The backwardated Nymex futures (for WTI) suggest draws at Cushing will continue, increased refinery utilization should continue to put overall pressure on crude inventories and we are interested to see if crude imports tick higher.”
The global oil market has been turned on its head as new U.S. oil production onshore the Lower 48, particularly from the light, sweet Bakken play in North Dakota and renewed efforts in the intermediate-grade Permian Basin of West Texas, is resulting in Gulf, East and West coasts’ refiners pushing imports away.
Oil tankers are idling as a result as well as because of new ship construction. Shares of Teekay Tankers Ltd., for example, have fallen from $24.30 in May 2008 to $2.87 today. In comparison, three others are down in roughly the same timeframe as well, ranging from 8% to 72%.
The TPH analysts estimate, “…We believe, by the end of fourth quarter, the remainder of Brent imports will be pushed out of the Gulf by domestic supply, potentially dislocating LLS (Louisiana Light Sweet) and widening the WTI and LLS spreads versus Brent.”
Editor’s Note: For more on U.S. refiner demand for Bakken crude, see Tri-Coastal Bakken, December 2012, Oil and Gas Investor.
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