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THE Price of Crude pt 14

General discussions of the systemic, societal and civilisational effects of depletion.

Re: THE Price of Crude pt 14

Unread postby GoghGoner » Fri 13 Apr 2018, 06:47:49

Cushing is been making the rounds in the media lately. I looked at Cushing data once to try and model prices with it but ended up throwing that out.

Cushing's oil market clout wanes amid U.S. export boom

That could pave the way for a change in the U.S. benchmark oil price, used to value tens of billions of dollars of crude and futures contracts every day. The current benchmark - called West Texas Intermediate crude, or “WTI” - has been derived from the price of physical oil delivered to Cushing for more than three decades.
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Re: THE Price of Crude pt 14

Unread postby ROCKMAN » Fri 13 Apr 2018, 13:04:48

Clout of WTI at Cushing??? Folks need to remember that very little oil refined in the US comes originally from WTI. First consider our still huge import volume. About 88% of our imports are heavier then WTI’s 39 API. In fact, almost 60% is heavier than 25 API with WTI and lighter oils accounting for just 11% of our imports.

And domestic production? A bit more then half of US oil production is a lighter gravity then WTI. In fact, only about 18% is in the range of 35 API to 40 API where WTI would fall. Almost 30% of domestic oil production is heavier then WTI. In fact, the US produces about as much heavy oil as it does WTI.

Remember that a “benchmark oil price” isn’t what oil is selling for. The WTI “price” is just one benchmark that the first sales price would be calculated upon. Depending on the API, sulfur et al content and location the price might be WTI - $15. Or WTI + $4/bbl. As mentioned many times the first sales price of Rockman’s Texas oil production doesn’t use the WTI benchmark. It uses the LLS benchmark…Light Louisiana Sweet. Because even having a transport discount it still pays more to barge it to Lake Charles, La. There are a variety of other oil benchmark prices in the world beside WTI and Brent.

In the real world (compared to the futures market world) very little WTI is produced or imported in to the US. Which also means very little WTI is shipped and stored at Cushing. It also doesn’t change the fact that whatever oil is stored at Cushing it represents only about 16% of the total amount of oil stored in the US. And the vast majority of that stored oil did not sell for whatever the WTI price was posted on the futures exchange that day. OTOH a 100% of the billion+ “paper bbls” that are occasionally traded in the futures market are all “WTI oil”. And none of those imaginary bbls are stored at Cushing. LOL.

Folks can do what they want but if they continue to confuse real oil with paper futures bbl they’ll have a problem seeing the big picture. Not only are very few bbls of WTI produced or imported into the US very little oil is bought at whatever the futures exchange is posting for the price of WTI. It’s not even a good trend stat to follow: actual sale price trends have significantly changed over the years as very cheap dilbit imports from Alberta increased and light oil condensate production boomed from the shales. Just one more reason models that try to predict the future price of oil using the WTI benchmark and the effects on the economy are lame IMHO.

And one more factor: refineries don’t buy any 39 API WTI. They buy 32 API blended oil. And the price they pay (which is eventually passed on to the consumers) is not related to the WTI bids posted on the futures exchange that change minute by minute. And can change significantly in the 24-hour new cycle. Such as when the US launches missiles at a ME country.
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