PIRA notes changes in crude oil markets

The oil-production surge from unconventional resources in North America is creating a surplus in the Atlantic Basin and reshaping oil and gas trade, notes PIRA Energy Group, New York.

Although refinery runs peaked in 2005-07 and have declined recently in the Atlantic Basin—including the Americas, Europe, and Africa—the group expects them to slowly resume growth as increases in the US and South America more than offset declines in Europe. But production, mainly from low-permeability reservoirs and the Canadian oil sands, will rise faster than refinery runs.

“As a result, a sizeable crude surplus will develop within the region, and crude will be forced to seek markets elsewhere, primarily in the rapidly growing countries in Asia,” PIRA said in a research note.

Already, African crudes once destined for the US are moving instead to Asia, where producers in the former Soviet Union, Mexico, and Canada also are seeking buyers.

Price differentials among regions are adjusting to these changes, as crude prices in Asia exceed those in the Atlantic Basin.

PIRA Energy points to recent changes in the Brent-Dubai crude-price spread, a measure of the relative incentive to supply Asian refineries from the Atlantic Basin (mostly African crudes) or from the Middle East. It models a theoretical value for the spread using a West African swing grade and taking account factors such as refining values, freight costs, sulfur premium, and market structure.

“The historically observed spread was wider than the theoretical parity spread by 50¢/bbl on average from 1995 to 2010,” PIRA Energy said. “Then, in 2011, the observed spread grew much wider than parity, mainly because of the loss of Libyan light-sweet crude production. However, since 2012 the spread has been narrower than the theoretical spread.”

Gary Ross, PIRA chief executive officer, said he expects the narrowing trend to continue.

“Similarly, product prices will generally be lower in the Atlantic Basin than in Asia-Pacific,” PIRA said. “This will allow US refiners to capture export opportunities, as well as provide incentives for product exports from newly built Middle Eastern refineries to Asia-Pacific rather than the Atlantic Basin.”

Related Articles

IAGC appoints new president

09/19/2014 The board of the International Association of Geophysical Contractors has reported that Ken Wells has been named as the organization’s president.

MARKET WATCH: Crude oil futures down more than $1 in New York, London

09/19/2014 The New York Mercantile Exchange October crude oil contract lost $1.35 to $93.07/bbl on Sept. 18. The November contract declined $1.22 to $91.98/bbl.

ExxonMobil ‘winding down’ Arctic well, complying with US, EU sanctions on Russia

09/19/2014 ExxonMobil Corp. released a statement that the company is complying with all US sanctions on Russia after news reports that the operator had halted...

ExxonMobil, Linn to make second asset exchange this year

09/19/2014 ExxonMobil Corp. has agreed to trade interest in 500 net acres from South Belridge field near Bakersfield, Calif., to Linn Energy LLC, Houston, in ...

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected