Oil should be up when it opens today:
> Canadian Keystone pipeline leak results in shut down. Will impact Cushing inventories.
> Venezuela held in default is a threat to reduce oil production by 1 million barrels a day.
Support level at $55 has held for WTI, which is giving the Bulls a lot of confidence. The next big resistance level is around $59.
Oil Price - Nov 17
Oil Price - Nov 17
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Nov 17
Comments below from Tudor Pickering Holt;
Keystone Pipeline spill in South Dakota, Part I – shutdown expected to widen WCS differentials, potential negative upstream impact (WCS $40.94) – TransCanada announced Thursday afternoon that it has shut the 590 mbbl/d Keystone pipeline as a result of a substantial 5,000 barrel leak outside Amherst, South Dakota in the northeast region of the state. While it remains too early to assess the length of outage, we’d expect WCS differentials to widen from current levels in the interim. In Sep 2017, Keystone transported 580 mbbl/d of heavy crudes to only 14 mbbl/d of light barrels. November WCS discounts widened by $0.50/bbl in Thursday trade to $14.20/bbl off WTI – we expect differentials to widen further given the extent of the spill that could result in a longer-term shutdown. Other egress options exist, primarily via the Enbridge Mainline, but we’d expect an incremental 600 mbbl/d of heavy volumes shifting to find little room for a new home which could result in apportionment of ENB’s system. On the upstream side, MEG, IMO and CVE would be most impacted negatively by any significant widening of differentials.
Keystone Pipeline spill in South Dakota, Part II – bad timing for TransCanada given the upcoming KXL vote (WCS $40.94) – TransCanada has not disclosed the estimated length of the outage as it will undoubtedly take time to perform environmental assessments and excavate the underground pipe to determine groundwater impacts. Ironically the leak occurred just days before the Nebraska Public Service Commission’s (NPSC) vote to approve TRP’s sister pipe, the controversial Keystone XL, on Nov 20, 2017. With the environmental permit already approved for KXL, the NPSC is not allowed to consider the impact of spills, fortunately for TRP. The commission’s scope is limited to revenue, job and other economic impacts of the project for Nebraskans. However, this certainly hasn’t stopped critics voicing their concerns over safety issues and this week’s spill will almost certainly embolden these opponents further. Expect further legal action ahead to prevent KXL from moving ahead.
Keystone Pipeline spill in South Dakota, Part III – Rockies & Midwest complex refiners with alternate WCS delivery could benefit (WCS $40.94) – There’s always a flip-side to these sorts of situations and in this case, look for coking refineries in the Rockies and Upper Midwest with access to WCS from other pipelines to potentially benefit should a prolonged outage widen WTI-WCS differentials. There are two other ENB pipe systems that also deliver heavy Canadian barrels into the US – the 280 mbbl/d Express pipeline that runs through Montana and into Wyoming, and the massive 2.2 mmbbl/d Mainline system into the upper Midwest. US independent refiners that pull WCS off (1) Express include HFC (Cheyenne, El Dorado), CVRR (Coffeyville) and PSX (Billings), and (2) ENB Mainline likely include MPC (Detroit, Robinson) and ANDV (St. Paul Park). Look for possible positive earnings impacts for these refiners should WCS spreads widen – this could help offset the current seasonal weakening of gasoline cracks in Q4’17. One ancillary impact to watch – Midwest refiners with Keystone commitments may source incremental lighter feedstocks from Cushing, which could tighten the Brent-WTI differential and potentially soften the environment for PADD 2 light crude refiners.
Keystone Pipeline spill in South Dakota, Part I – shutdown expected to widen WCS differentials, potential negative upstream impact (WCS $40.94) – TransCanada announced Thursday afternoon that it has shut the 590 mbbl/d Keystone pipeline as a result of a substantial 5,000 barrel leak outside Amherst, South Dakota in the northeast region of the state. While it remains too early to assess the length of outage, we’d expect WCS differentials to widen from current levels in the interim. In Sep 2017, Keystone transported 580 mbbl/d of heavy crudes to only 14 mbbl/d of light barrels. November WCS discounts widened by $0.50/bbl in Thursday trade to $14.20/bbl off WTI – we expect differentials to widen further given the extent of the spill that could result in a longer-term shutdown. Other egress options exist, primarily via the Enbridge Mainline, but we’d expect an incremental 600 mbbl/d of heavy volumes shifting to find little room for a new home which could result in apportionment of ENB’s system. On the upstream side, MEG, IMO and CVE would be most impacted negatively by any significant widening of differentials.
Keystone Pipeline spill in South Dakota, Part II – bad timing for TransCanada given the upcoming KXL vote (WCS $40.94) – TransCanada has not disclosed the estimated length of the outage as it will undoubtedly take time to perform environmental assessments and excavate the underground pipe to determine groundwater impacts. Ironically the leak occurred just days before the Nebraska Public Service Commission’s (NPSC) vote to approve TRP’s sister pipe, the controversial Keystone XL, on Nov 20, 2017. With the environmental permit already approved for KXL, the NPSC is not allowed to consider the impact of spills, fortunately for TRP. The commission’s scope is limited to revenue, job and other economic impacts of the project for Nebraskans. However, this certainly hasn’t stopped critics voicing their concerns over safety issues and this week’s spill will almost certainly embolden these opponents further. Expect further legal action ahead to prevent KXL from moving ahead.
Keystone Pipeline spill in South Dakota, Part III – Rockies & Midwest complex refiners with alternate WCS delivery could benefit (WCS $40.94) – There’s always a flip-side to these sorts of situations and in this case, look for coking refineries in the Rockies and Upper Midwest with access to WCS from other pipelines to potentially benefit should a prolonged outage widen WTI-WCS differentials. There are two other ENB pipe systems that also deliver heavy Canadian barrels into the US – the 280 mbbl/d Express pipeline that runs through Montana and into Wyoming, and the massive 2.2 mmbbl/d Mainline system into the upper Midwest. US independent refiners that pull WCS off (1) Express include HFC (Cheyenne, El Dorado), CVRR (Coffeyville) and PSX (Billings), and (2) ENB Mainline likely include MPC (Detroit, Robinson) and ANDV (St. Paul Park). Look for possible positive earnings impacts for these refiners should WCS spreads widen – this could help offset the current seasonal weakening of gasoline cracks in Q4’17. One ancillary impact to watch – Midwest refiners with Keystone commitments may source incremental lighter feedstocks from Cushing, which could tighten the Brent-WTI differential and potentially soften the environment for PADD 2 light crude refiners.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group