Bakken trades at premium to Cushing
Benchmark WTI and Bakken delivered to the Texas coast are both trading at a $4/bl premium to WTI Cushing for January amid rising pipeline access for Permian crude to reach the Gulf coast.
For January delivery to Magellan’s east Houston terminal, West Texas Intermediate (WTI) started the trade month today between $3.90 and $4.20/bl over the Cushing benchmark. Light sweet Bakken crude for January delivery to Nederland or Beaumont, Texas, is valued about 10¢/bl under WTI Houston.
Today, Argus launched an assessment for Bakken crude delivered to Nederland or Beaumont via the Energy Transfer Crude Oil pipeline (ETCOP) by way of the 525,000 b/d Dakota Access pipeline (DAPL). The assessment reflects the Bakken value relative to CMA Nymex WTI plus an Argus WTI differential to CMA, and includes transactions done as a differential to CMA Nymex WTI plus the balance of trade month prices (Balmo) for the Argus WTI differential to CMA price. Typical US pipeline spot market trades are done as an instantaneous exchange of the grade for Domestic Sweet (DSW) crude in Cushing to establish a differential to the light sweet benchmark WTI. But trading Bakken as a differential to the calendar month average may be preferable in an export market as it does not require the exchange of the Cushing grade.
Bakken last traded at Beaumont at $5.20/bl premium to December WTI on 17 November, when December WTI Houston was $5.29/bl over the benchmark. December WTI Houston ended the trade month at an average premium to Cushing of around $5/bl.
Delivery of domestic light crude grades to the US Gulf coast has been rising. Soon WTI from west Texas delivered to Enterprise’s Echo terminal on the Houston Ship Channel is expected to join the coastal spot market. Enterprise’s 450,000 b/d Midland-to-Sealy pipeline is expected to start deliveries this month.
In the short-term, the recent outage of TransCanada’s 590,000 b/d Keystone pipeline north of Cushing is likely to have allowed more light crude to be shipped from Cushing to the Texas coast on TransCanada’s Marketlink pipeline, such as DSW, Bakken or Rocky Mountain crude grades. Keystone is to restart at reduced rates starting tomorrow.
The US Gulf coast is expected to become a global pricing hub for crude trade in the next decade, Unipec president Chen Bo said at the Argus Shanghai Crude Forum last week. Unipec is the trading arm of Chinese state-controlled Sinopec.
Chen said he expects the US to replace Africa as Asia-Pacific’s second-largest crude supplier after the Mideast Gulf by 2020.
US light sweets, with their higher naphtha cuts, are desirable as Chinese refiners add 260,000 b/d of new naphtha reforming capacity this year. Unipec plans to increase crude imports from the US to 200,000 b/d next year, from at least 110,000 b/d so far this year.