From the always excellent, RBN Energy (do read the whole thing), here…
”With stock prices for most Permian producers mostly lower than they were this time last year, one might expect oil prices within the basin would reflect the same negativity, but that simply isn’t the case. In fact, Permian oil prices are significantly stronger than they were at the end of 2018, averaging more than $60/bbl over the past week, compared to around $40/bbl this time last year. Some of that gain has been driven by an overall increase in world oil prices, a topic we will reserve for another time. However, much of the strength has been the result of Permian oil no longer needing to carry a huge discount to other domestic hubs as shippers compete for super-scarce pipeline space. For example, in December 2018, prices for West Texas Intermediate (WTI) at the Midland trading hub in the Permian were more than $12/bbl lower than the price of similar quality crude oil at the Magellan East Houston (MEH) hub along the Texas Gulf Coast. This year, that spread has narrowed to just over $2.00/bbl, while absolute prices on the coast are up almost $10/bbl. In Part 1 of this series, we discussed the prospective market impacts of one of the capacity additions: Plains All American’s new Cactus II Pipeline. Here, we provide an update on Cactus II, take a look at its most recent flow data, and begin to explore how its operation is affecting crude oil flows from the Permian.”
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