[rockdoc123]

Came across this article in Bloomberg this morning....really worth a read as it discusses a lot of the problems the Saudis face going forward in delivering both energy and social programs at home and how that impacts the price of oil they require (we discussed this issue on another thread). Some of it is misleading I think but judge for yourself

http://www.bloomberg.com/news/2012-12-12/oil-at-60-or-120-doesn-t-prevent-u-s-supplanting-saudi-arabia.html

this quote from the article suggests they don't understand supply and demand to my mind
$this->bbcode_second_pass_quote('', 'U').S. average daily output will climb 14 percent this year, the most in six decades, according to the Energy Department, as Anadarko Petroleum Corp. and Chesapeake Energy Corp. exploit new deposits from North Dakota to Texas. Even though America’s 6.8 million barrels a day in November was 30 percent less than Saudi Arabia’s 9.7 million, the International Energy Agency says the U.S. will be bigger by 2020.

West Texas Intermediate, or WTI, will rise about 15 percent through 2015, to $100 a barrel, according to the median of 13 analyst estimates compiled by Bloomberg. Brent, the benchmark for Arab Light and Arab Medium grades, may gain less than 1 percent, to $110, the forecasts show.

[Keith_McClary]

Analysis: Exports will be next divisive U.S. oil tangle
$this->bbcode_second_pass_quote('', 'L')AW DATES TO ARAB OIL EMBARGO ERA

The main law governing U.S. crude oil exports is the 1975 Energy Policy and Conservation Act.

Passed in the aftermath of the Arab oil embargo of the early 1970s, the law requires the president to restrict trade of domestically produced crude oil outside the country. Only a handful of other commodities are similarly regulated, including such things as unprocessed Western red cedar and horses exported by sea.

While companies can easily export crude oil products, such as gasoline and diesel, sending unrefined crude oil out of the country requires a license from the Bureau of Industry and Security in the Commerce Department.

Unlike other policy areas that require legislative action to change, the president is able to expand crude oil exports when a finding is made that doing so is in the country's best interest.

President Ronald Reagan made such findings in 1985 and 1988 to permit exports to Canada, as well as the finding in 1985 that allowed exports from Alaska's Cook Inlet. In 1992, President George Bush approved the limited export of heavy crude oil from California after environmental laws in the state greatly reduced demand domestically.

In both cases, these exceptions were made for crude oil production that was relatively cut off from the rest of the nation and in which access to foreign markets was necessary to support the output.

Exports are also allowed in some cases where the crude is part of a swap that will result in an equal amount of petroleum products being imported into the United States. In these cases, companies have to prove the crude oil could not have been reasonably marketed domestically.

Former Commerce Department officials said crude oil applications have typically made up only a small part of the export bureau's work.

"I don't think these laws existed at any time we've had an oil surplus," said Bill Reinsch, who was
Undersecretary for the Export Administration at the Commerce Department in the 1990s under President Bill Clinton.

"They were designed to deal with when we have an oil deficit. We still do, but it's not the same," said Reinsch, who is now president of the National Foreign Trade Council.

[sparky]

.
The report is really bad ,
it assume an large increase of production in the Midwest and the price of WTI catching up with Brent
those two situation would happen only if the demand for oil in the Midwest increase dramatically

The WTI is now the lower 48 production price ,
ten dollar lower and the production rate would suffer ,
after all Canadians do feel being ripped off.

As for the Saudi , the OPEC basket price show some heavy intervention to keep the crude in the 105 $/B
their production is reportedly decreased ,

[Tanada]

Wait a minute, I always assumed the Canadians sold us their oil at the international Brent price, not the USA WTI price. If they are selling at WTI they are getting ripped off.

[kublikhan]

$this->bbcode_second_pass_quote('rockdoc123', 't')his quote from the article suggests they don't understand supply and demand to my mind
So they are saying that US production will continue to rise and that so will WTI? Makes no sense to me given there is already a large gap between WTI and Brent and more US production should just increase that gap unless the US suddenly starts exporting large quantities of oil which of course defeats the purpose of being "energy independant".

[Keith_McClary]

$this->bbcode_second_pass_quote('Tanada', 'W')ait a minute, I always assumed the Canadians sold us their oil at the international Brent price, not the USA WTI price. If they are selling at WTI they are getting ripped off.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'T')he low WTI price is because of transportation bottlenecks, not supply and demand fundamentals. They can't get the oil to where it is needed. New drilling outpaced new pipelines. They need a new pipeline from Cushing to the Gulf Coast. Continuing to rely on rail and trucks to transport oil is going to continue to hold down the price of WTI relative to Brent. Although the Seaway reversal should help somewhat.

[Pops]

Couple of points, Buffet has made a big effort to provide 1MMb/d BNSF rail capacity, he's making up for lost coal tonnage and he must be offering a good price because the pipe planned to be built starting next year down to Cushing was canceled because of lack of interest. I linked a Rigzone story elsewhere.

As a side note, the conoco/philips pipeline that skirts my property is being expanded - that would be Cushing to a tank farm in SW MO, although it went all the way to Chicago once upon a time. I can't find any news but will report in when I do.

The Brent, WTI, etc prices are benchmarks, basically gauges of market price. As I understand it, most oil is traded off the open market by agreement. Lets say we are making a deal, we agree to Brent as a benchmark to determine how hot or cold the overall market is, that's our base. We then would add or subtract x amount for weight, impurities, FOB location, etc of the specific crude we are trading.

I think it is illegal to export crude from the US except a few specific exceptions, we can export product, I don't know if there is a limit.

[evilgenius]

Yeah, but is it illegal to build a pipeline from Canada in order to export Canadian oil from the Gulf? Ostensibly the effort is to get Canadian oil to the Gulf Coast refineries, but without some legal barrier how long will it be before it turns into an export heavy business? Who knows, if they get the right kind of laws passed they can even export US oil, or refined products, under the guise of 'percentage of expected five or ten year average output'. In which case they can borrow against high expected fracking output, which may never materialize. If that happened I wonder if at some point down the road, due to the politics, the US would be awash in gasoline, at a time when the rest of the world is really hurting?

[rockdoc123]

$this->bbcode_second_pass_quote('', 'T')he Brent, WTI, etc prices are benchmarks, basically gauges of market price. As I understand it, most oil is traded off the open market by agreement. Lets say we are making a deal, we agree to Brent as a benchmark to determine how hot or cold the overall market is, that's our base. We then would add or subtract x amount for weight, impurities, FOB location, etc of the specific crude we are trading.

[Pops]

The thing is, the US average producer acquisition price is around $100/bbl now because... we import 2x what we produce.

When the dakotas are producing 10MMb/d and selling at the well for $60 why wouldn't it be cheaper to ship it to Chicago or Richmond CA than China via GOM?

Are the refiners pushing for relaxing the laws?

As mentioned above, there was not enough interest to proceed with a pipe from ND, even tho BNSF "only" has 1MMb/d of rail capacity. If you were one of the big guys up there and expected to pump big numbers for a long time, wouldn't you want to lock in pipeline capacity? Especially knowing that it wouldn't come online for a couple of years when rail cars would be getting cramped?

[kublikhan]

$this->bbcode_second_pass_quote('Pops', 'T')he thing is, the US average producer acquisition price is around $100/bbl now because... we import 2x what we produce.

When the dakotas are producing 10MMb/d and selling at the well for $60 why wouldn't it be cheaper to ship it to Chicago or Richmond CA than China via GOM?