Picture below indicating a 25M bbl YoY increase in oil stocks.
EIA report includes an update of US Atlantic basin imports being effected by infrastructure investments in the crude by rail method of domestic crude oil transportation.
Historically, most crude supply to PADD 1 has been imported light sweet crude. The region lacks crude oil pipeline connections from domestic production regions and has very limited in-region production.
However, since 2010, rising light tight crude oil production in the Bakken formation in North Dakota, combined with the expansion of crude-by-rail infrastructure, has reduced the region’s import dependence.
East Coast imports of crude oil averaged 98% of gross refinery inputs in 2010 but only 51% in 2014. [Ed: Hmmmmmm...]
While access to Bakken crude oil has provided PADD 1 refineries with crude selection flexibility, actual refinery crude slates will continue to be a function of relative crude prices.So in the east coast market, due to the investments made in rail transportation infrastructure over the last few years, looks like Bakken producers are now in competition with the foreign Atlantic coast applicable producers.
This has led to about a 50% drop off in imported oil use on the east coast of the US as non-OPEC Bakken producers are setting the price of oil lower by lowering their offers to increase their US east coast market shares ... they have made pretty substantial inroads into the east coast market ;)
This EIA report explains this trend in more detail.
Bakken crude oil is a good fit for most East Coast refineries, which generally favor a light sweet crude slate. As previously discussed in TWIP, there has been substantial investment in crude-by-rail infrastructure on the East Coast to accommodate receipts of Bakken crude at PADD 1 refineries and many crude-by-rail unloading facilities are now operational. Merchant terminal operators Global Partners LP and Buckeye Partners LP own storage terminals in Albany, New York, into which crude is delivered by rail and from which crude is shipped out by barge, down the Hudson River to refineries in New York Harbor and Philadelphia. PBF Energy Inc., which owns and operates two refineries on the East Coast, in Delaware City, Delaware, and Paulsboro, New Jersey, built a crude-by-rail unloading facility at its Delaware City refinery that has an estimated capacity of 120,000 barrels per day (bbl/d). Additionally, Sunoco Logistics owns a 40,000-bbl/d rail unloading facility in New Jersey, near the Philadelphia refining center.
The lower cost of Bakken crude oil compared to imported crude oil has provided the impetus for investing in the crude-by-rail facilities that enable PADD 1 refiners to receive more domestic crude.
Looks like if current trend can continue, eventually the foreign producers will be shut out of the east coast market. Or at least have to match prices with whatever price the Bakken producers need.
2 comments:
US producers will continue pumping existing wells, but may not invest in drilling new wells at current oil prices. Hence the flow of Bakken oil may slow to a dribble in a year or two, as existing wells are exhausted.
The break-even point for Bakken oil is debatable, with some sources claiming Bakken oil would still be profitable at $50. However, the fact is that North Dakota is ALREADY seeing cuts in drilling due to low oil prices.
http://www.startribune.com/business/285687401.html
This thing is not sustainable at low prices, but existing installations have will be exhausted obviously (the half-life of a fracking deposit is very low compared to traditional deposits though, and much more dirty). What Dan is saying.
Also, so much bad debt from those investments on private parties... specially at this prices. This exactly like real estate, as long as prices are sustained at certain level all looks good on the bank, but if they fall negative equity takes it's due course. And as easy to exploit deposits are exhausted, the price at which extractions becomes profitable rises, exactly like traditional oil extraction, so the trend is not specially favourable.
We still don't accept the fact that an economy run on oil is not something we can do forever because the lack of foresight, better focus on other technological initiatives. Now is a good opportunity with the low oil prices to follow on Toyota or Tesla initiatives but everybody will see this as a signal to continue the current trend.
See you in 2017 when oil is back to recession-inducing levels and the world is in an even worse place with the barbarian-style free trade running amok, a cooling Asian economy and economic warfare of the EU elites creating chaos (all those things can help keep the oil price lower, but as inventories are cleared we may see a bottom in maybe 3-5 months and a starting low climb up of prices).
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