June Opens with More Volatiltiy Inside the Bubble

Link to article: https://stillwaterassociates.com/june-opens-with-more-volatiltiy-inside-the-bubble/

June 5, 2012

The last time we checked in on the Mid Continent Bubble, the price differentials between WTI and Bakken and WCS had softened.  On May 16, Bakken was $2 under the WTI price of $93 per barrel, and WCS was $15 under.  Since then the price of crude oil has dropped. WTI sold at $86 per barrel on June 1st.  The price differentials outside the bubble have remained virtually unchanged, but the differentials inside the bubble have widened.  Bakken was $8 under WTI on June 1st, while WCS was $20 under. The weak distribution system in the mid continent is extremely sensitive to any disruption, so some hiccup along the way has caused prices to drop. The reversal of the Seaway Pipeline two weeks ago should have relieved some of the pressure, but that’s clearly not the case.  We’re interested to hear what you think might be causing the volatility in the spreads.  Please leave a comment if you have any ideas.

In a related note, the glut of crude oil in the mid continent is making the Canadians nervous.  Canada’s Globe and Mail is reporting this week that with crude prices as low as they are, some oil sands plants are nearing break-even levels and the current economics threaten new projects.

Categories: Wisdom from the Downstream Wizard