Magellan East Houston ("MEH") is becoming a major hub for crude oil. Like Louisiana Light Sweet ("LLS"), MEH oil competes with seaborne oil, so it is priced close to Brent. The upstream companies that can get to MEH or LLS get a significant premium price for their oil.
Jagged Peak Energy (JAG): "The Company recently entered into a firm transportation and sales agreement with Trafigura Trading LLC, that will link a portion of its future production to a waterborne pricing hub, MEH. By diversifying the pricing points to which its produced oil is linked, the Company will further mitigate its risk to pricing differentials. The new firm transportation and sales agreement will link 30,000 Bbls per day of gross production to MEH pricing over a five-year period starting at the commencement of the Cactus II pipeline, which is expected to be in operation in the second half of 2019. The Company has also extended its current oil sales agreement through 2020. The extension of this agreement along with the firm transportation and sales agreement provides flow assurance for all the Company's piped oil production through 2020."
New index for oil prices
New index for oil prices
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group