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Page added on October 4, 2018
$100/b darlings of US oil could lead way for crude
The oil world seems ready, or even desperate, to take $100/b crude to the party.
But while the dirty markets are still hunting for their bow ties, some US refined products are already bouncing across that dance floor.
Low-RVP San Francisco 84-octane gasoline blendstock was assessed up $1.76/b at $1.0109/b Tuesday — its first day over the $100/b threshold since August 11, 2015. Los Angeles blendstock summited $100/b Monday.
Of course, that’s the price on the Kinder Morgan pipeline. You’ll pay a lot more at the pump in Petaluma.
The magic number in cents/gal for $100/b gasoline is 238. Low-octane fuel in Portland, Oregon, and Seattle was seen nearing that threshold Tuesday afternoon.
One grade of product that’s far more like crude, the refinery feedstock vacuum gasoil, is on track to summit $100/b some time later this month.
VGO at 20-25 API has a density lower than some crudes. It feeds a fluid catalytic cracker or hydrotreater to make gasoline and diesel. Differentials have been in the high teens against crude futures so far this fall, leaving Europe market players sending more barrels to US ports to leverage the arbitrage.
Low-sulfur VGO barges at Los Angeles have held over $90/b for 11 straight trading days and were down 67 cents at $95.48/b Tuesday.
Since August 14, the California feedstock has been rising at 41 cents per trading day. At that rate, it would go over $100/b on October 16.
Proceed with caution on such speculation, however. One US feedstocks source said VGO seems ready for a fall.
“I feel like we are topping out here and there is not much room to move up,” the source said.
As for crude, front month Louisiana Light Sweet at St James, Louisiana, rose $2.17/b to $83.37/b Tuesday. Since August 14, it has been rising at a rate of 42 cents per trading day. If it keeps that pace — and that is a huge if — it could cross the $100/b threshold in early to mid-November.
WTI assessments remain in the $70s, well off the threshold. $100/b crude could be expected to generate interest in oil exploration, gasoline blending and dozens of other oil venture.
There is a dark side to three-digit crude, although you’d be stuck finding anyone talking about it in Houston or Calgary. “It would be devastating for global economies,” a US market source said. “Demand would crash. Public transportation usage would soar. It would be good for Tesla, though.”
A second market source said the lack of pipeline capacity to move US sweet crudes will put brakes on those markets. That source predicted the second half of 2019 for $100/b crude.
14 Comments on "$100/b darlings of US oil could lead way for crude"
BobInget on Thu, 4th Oct 2018 10:12 am
China is no longer importing US crude.
It say rat cheer.
China will however import Venezuelan oil, if they were able. With a $10 buck arb between Brent and WTI (why is that?) be sure, cheap US crude will
find its way to Asia. Plus $70 crude makes shale
profitable.
Duncan Idaho on Thu, 4th Oct 2018 10:53 am
Well—-
https://proxy.markets.businessinsider.com/cst/MarketsInsiderV2/Share/chart.aspx?instruments=300002,5,0,333&style=instrument_double_precision&period=OneYear&timezone=Eastern%20Standard%20Time
Antius on Thu, 4th Oct 2018 11:53 am
$100/bl oil is necessary for US domestic oil production to remain profitable.
https://gefira.org/en/2018/09/25/oil-at-100-a-barrel-is-a-necessity-for-us-energy-independence/
This has been the catch-22 for the past 10 years. The price that producers need to remain profitable is more than consumers can afford. This is how peak oil happens. The economy has a certain energy intensity, which places a lid on what we can afford to pay for energy. Eventually the amount of oil we can afford reaches a historic peak.
Cloggie on Thu, 4th Oct 2018 12:11 pm
Who would like $100 oil?
– Putin and his finance minister
– Fracking industry
– Renewable energy industry
– Signatories Paris Accords
Bring it on!
rockman on Thu, 4th Oct 2018 3:54 pm
Antius – The latest oil drilling rig count from Baker Hughes sits at 867. I always find it amusing to see statements indicating that most, if not all, of those companies are INTENTIONALLY losing money with oil at $70/bbl…or less. I suppose the assumption is that their shareholders, management and money lenders are backing the efforts for patriotic reasons. What’s really amazing is how they continue to have the capex (in fact ever increasing capex as the rig count has climbed from less than 400) to continue drilling. One almost has to call on Devine intervention to keep refilling the budget coffers.
That must be it! God bonds. LOL.
Antius on Thu, 4th Oct 2018 4:48 pm
Rockman, it is truly amazing what can be done when money can be borrowed at close to zero interest rates. Is there any real doubt that the huge increase in tight oil production would not have been achievable with the financial conditions before 2008?
Roger on Thu, 4th Oct 2018 5:52 pm
“It would be devastating for global economies,” a US market source said. “Demand would crash. Public transportation usage would soar. It would be good for Tesla, though.”
Hogwash. The only demand that will crash is for $5/cup coffee. We’ve been there before…show me the “demand crash”. Didn’t happen.
Davy on Thu, 4th Oct 2018 6:03 pm
“Revealing the Dark Side of Wind Power”
https://tinyurl.com/y9vohf4n
“Research published today may help clarify the situation — and it’s not encouraging for wind-power enthusiasts. It suggests that the power available from wind is much more limited than many experts thought, and that deployment on a larger scale could significantly raise temperatures over the Earth’s surface, as turbines alter atmospheric flows. The research highlights a painful but not altogether surprising reality: Even the cleanest renewable technologies come with environmental costs.”
“The simulations revealed that interactions of the turbines with the atmosphere would likely lead to a redistribution of heat in the lower atmosphere, resulting in a 0.54 degrees Celsius (0.97 degrees Fahrenheit) warming within the wind farms’ region itself, and an increase of 0.24 degrees Celsius (0.43 degrees Fahrenheit) over the continental U.S. This result, they note, actually matches up pretty well with recent satellite observations of local warming around wind farms operating in California, Illinois, Iowa and Texas. They also found that an expansive wind farm would need to operate for more than a century or so before the reduction of global carbon dioxide emissions would offset the local warming effect.”
print baby print on Fri, 5th Oct 2018 12:43 am
Yes Rockman it is interesting but Antius gave you an excellent explanation
rockman on Fri, 5th Oct 2018 12:23 pm
baby = You and Antius both suffer from a profound ignorance of petroleum industry financing. You both (and unfortunately many others) childishly believe companies finance at the Fed rate. I suggest you both do some simple net research and learn what the Fed rate actually represents. I don’t want to be harsh but I’m fed up with folks who won’t do a simple web search and then post on here pretending they are “experts” on a subject matter that they actually understand NOTHNG about.
Consider EOG, the most active US shale player. $900 million in bonds with a coupon rate of 5.6%, But that’s today with a strong recovery underway. EOG bonds today get an investment grade rating from Moody. How bad did it get when oil prices crashed in 2014:
“Forest’s bonds plunged. Its $577.9 million of outstanding 7.25 percent notes due in 2019 traded at 88 cents on the dollar on April 22, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority, a drop from this year’s peak of 98.4 cents on Feb. 24. The notes are now yielding 10.31 percent, up from 7.6 percent.”
Got that: Forest bond value sunk into junk bonds status and dropped so low in value the effective rate increased from 7.6% to 10.31%. I wouldn’t call that “nearly zero”. Now would anyone else with even a little bit of f*cking common sense do so?
And then there’s always Chesapeake Energy wit $800 million in bonds with a 7.25% coupon rate. The list is endless: just search the web for the bonds of any shale player. Easy to prove me wrong…if you’re too lazy or ignorant to do so.
But all this childish interest rate bullshit is to avoid addressing the obvious FACT I pointed out in my original post: that hundreds of shale playing companies could not have spent hundreds of $BILLIONS for the last 10 YEARS and have been losing money the entire time regardless of what f*cking interest rate they were paying, could they?
And it you don’t understand how a bond yield varies with a bond’s value do some research. I’m tired of educating folks like y’all as if you were ten year olds.
Anonymouse1 on Fri, 5th Oct 2018 1:17 pm
Well, good thing they have a creationist, oil-low-rent oil cartel shill like you to edumacate them on the finer print of the cancer cartels dodgy financing, right narrativeman?
Btw ‘Antius’ = cloggenkike. Being a flat-earth corny autistic, just like you, you’ll have plenty to argue about im sure. For example, you two can argue about who is more awesome, the CIA or the Mossad. Yaweh or Jesus. OR, what is better for you kids, frak gas, or shale gas. The possibilities are endless
Cloggie on Fri, 5th Oct 2018 2:19 pm
“Btw ‘Antius’ = cloggenkike.“
Yep, we are both Israeli of the antisemitic variety.
/rolleyes
Here is anonymouse1 in real life:
https://youtu.be/sGUNPMPrxvA
Davy on Fri, 5th Oct 2018 2:30 pm
Neder, you and I don’t see eye to eye on many things but I think both of us would agree anonymous1 is drifting off into the bizarre. If we could eliminate him from the board I think several socks would go with him.
print baby print on Sat, 6th Oct 2018 3:30 pm
Rockman printing presses are magical thing they make gold oil food from thin air awesome I want some