The Venezuela Dilemma by TPH on March 29, 218
Falling Production, Narrowing Differentials Presenting Potential Issues for Gulf Coast Coking Refineries
Venezuelan crude production is in a sorry state of affairs, with the country recording a whopping -12% decline (-273mbpd y/y) in 2017 (the numbers are even worse exit to exit). To stabilize production, it would probably take a doubling of rig count and significant additional investment, which doesn't appear likely anytime soon. As a result of the reduced supply, Venezuelan crude discounts are narrowing. Venezuela barrels traded at a $7.61/bbl discount to LLS in 2017, down from $9.69 in 2016. In Q1'18, that discount is even smaller at $6.63/bbl. Falling Venezuelan supply and narrowing discounts are potentially alarming for US Gulf Coast refiners. In 2017, Venezuela tied with Mexico as the largest supply source for heavy crude deliveries to the Gulf Coast (both at 28% share). Canada has been growing but is still at 19%. The largest US buyers of Venezuelan barrels include VLO, Citgo, CVX, PSX, and PBF, which together accounted for 88% of all Venezuelan crude imports in 2017. MPC, LYB, and Motiva are also fairly ratable importers, although on a much smaller scale. Among the US independent refiners, PBF easily leads the pack on earnings exposure to Venezuelan crude, with every $1/bbl change in Venezuelan crude differentials impacting EPS by 6%. Given the looming threat of an oil embargo or other sanctions, we believe Venezuela is a key issue to monitor for US Gulf Coast refiners.
Venezuela production will keep falling
Venezuela production will keep falling
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Venezuela production will keep falling
Oil to rise in 2018 as OPEC wages tug-of-war with U.S. shale. Reuters.
Oil prices are likely to rise this year thanks to supply disruptions and an OPEC-led deal to limit production, but doubts over the future of compliance with the multilateral agreement and rising U.S. production could stem the upward momentum, a Reuters poll showed on Thursday. A survey of 31 economists and analysts polled by Reuters showed Brent crude would average nearly $64 a barrel in 2018, versus $63 forecast in the February survey, but below the $67.18 average for the benchmark so far in 2018. Brent prices have risen 4 percent this year, supported by a deal between the Organization of the Petroleum Exporting Countries and non-OPEC producers led by Russia to curb output by about 1.8 million barrels per day (bpd) through 2018.
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I am using $60/bbl WTI in all of my forecast/valuation models.
Oil prices are likely to rise this year thanks to supply disruptions and an OPEC-led deal to limit production, but doubts over the future of compliance with the multilateral agreement and rising U.S. production could stem the upward momentum, a Reuters poll showed on Thursday. A survey of 31 economists and analysts polled by Reuters showed Brent crude would average nearly $64 a barrel in 2018, versus $63 forecast in the February survey, but below the $67.18 average for the benchmark so far in 2018. Brent prices have risen 4 percent this year, supported by a deal between the Organization of the Petroleum Exporting Countries and non-OPEC producers led by Russia to curb output by about 1.8 million barrels per day (bpd) through 2018.
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I am using $60/bbl WTI in all of my forecast/valuation models.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group