Bakken & Eagle Ford Oil Price

[dan_s]

I do take these price differentials into consideration when I update my forecast models and valuations. - Dan

PRNewswire Aug. 21, 2014

Oil production from shale formations in North Dakota and Texas increased by more than 86,000 barrels per day (b/d) or 3.4% in July, according to Bentek Energy, an analytics and forecasting unit of Platts, a leading global provider of energy, petrochemicals, metals and agriculture information.

In North Dakota, the active oil rig count is close to 200 and the highest level in nearly two years, according to Jack Weixel, Bentek Energy director of energy analysis.

"Oil production gains from the Bakken and Eagle Ford shale formations are a major reason why U.S. imports of crude oil have dropped to levels not seen since the mid-1990s," said Weixel. Bentek data analysis showed that from July 2013 to July 2014, total U.S. crude oil production increased more than 1.5 million b/d.

Crude oil production in the North Dakota section of the Bakken shale formation of the Williston Basin averaged nearly 1.2 million b/d in July, according to Bentek. This was 280,000 b/d higher than the July 2013 level. Oil production from the Eagle Ford formation averaged 1.5 million b/d last month, up 411,000 b/d from July 2013.

"Prices of Eagle Ford Shale crude dropped nearly $12 per barrel (/b) from mid-July through mid-August, while the price of Bakken crude fell $7.38/b during that time period," said Richard Capuchino, Platts managing editor of Americas crude.

The Platts Eagle Ford Marker, a daily price assessment that was launched in October 2012and reflects the value of oil from the Eagle Ford Shale formation in South Texas, was $98.77/b on August 18 after reaching an intra-month high of $110.71/b on July 23. The downward price movement was largely attributed to weakness in the price of Light Louisiana Sweet (LLS), the basis for the Eagle Ford Marker. As reported by Platts, low demand in a thin market, as well as government data showing an increase in crude inventories in the U.S. Gulf Coast put pressure on prices of LLS and dragged down values for the Platts Eagle Ford Marker.

The monthly price performance of oil from the Bakken formation at Williston, North Dakota, ranged from a low on August 18 of $84.65/b and a high of $92.03/b on July 17, according to the Platts Bakken data.

The Platts Bakken, introduced earlier this year, is a daily assessment of price for oil closest to the wellhead prior to determination of transportation by rail or pipe. The assessment reflects a sulfur content of 0.2% or less and an American Petroleum Institute (API)** gravity of 42 or less, similar to the nature of North Dakota Light Sweet crude. The Platts Eagle Ford Marker reflects the value of a median 47-API Eagle Ford crude barrel, based on the crude's product yields and Platts product price assessments, adjusted for U.S. Gulf Coast logistics.

[bobs]

thanks for clarifying that key point but I am concerned about the speed at which the domestic supply is ramping up so quickly if demand softens even slightly....Bob

[dan_s]

It is VERY IMPORTANT to remember:

1. North America is the ONLY place where oil production is on the rise.

2. A lot of the "oil" being produced in the U.S. shale plays is not crude oil. It is condensate and ngls.

3. Demand for heating oil picks up in Q3 all over the world. If the weather forecasts are correct, there could be significant heating oil demand in just a couple months. 90% of humans live in the Northern Hemisphere.