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Saudi Arabia cut its oil exports by 1.3% M/M in December to a 15-month low of 7.06M bpd, while...

Saudi Arabia cut its oil exports by 1.3% M/M in December to a 15-month low of 7.06M bpd, while Iraq reduced shipments by 10% to 2.35M bpd, the Joint Organizations Data Initiative says. However, Nigeria increased overseas sales by 14% to 2.29M bpd and Venezuela by 19% to 1.97M bpd, the most since July 2008. WTI -0.3%.
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Comments (12)
  • permanent
    , contributor
    Comments (195) | Send Message
     
    What is the deal with the large spread between Brent and WTI. From my understanding WTI is the better (quality) oil and it still remains much cheaper than Brent.
    Shipment cost canĀ“t be that high.
    18 Feb 2013, 04:29 AM Reply Like
  • kmi
    , contributor
    Comments (4040) | Send Message
     
    The simple answer is that it reflects different supply and demand constraints. WTI ("west Texas intermediate") reflects US production explicitly destined for US locations since the US disallows crude to be exported. Brent is the second most widely traded oil contract and is typically referred to as the 'world' benchmark since it is used to sell product in many markets, including the US, but primarily Europe.

     

    The 'quality' of oil is less important than pricing in most instances since the relevant issue is mostly whether a refiner can refine it.

     

    'Shipment cost' is less important than supply-demand constraints: Brent is sold in markets where demand has moved the price higher than markets where WTI is available.

     

    Right now WTI supply is heavily landlocked but many varied efforts and mechanisms are being put in place to bring the product to refiners. This product is expected to eventually displace virtually our entire imports of crude. That will result on lifting some of the pressure off Brent (reduced demand from the US market) but won't necessarily impact domestic prices for refined products since those are exportable to markets where profit margins are better.

     

    Were it not for exports of refined products WTI would arguably be way lower because of how much supply we have.
    18 Feb 2013, 09:13 AM Reply Like
  • dingojoe
    , contributor
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    WTI isn't WTI anymore. Shale oil tends to much lighter than old WTI and Canadian Tar is much heavier. The problem is both logistical and quality--at least in regards to what refineries are currently geared for and can make the most money off of.

     

    http://bit.ly/Wp465H
    18 Feb 2013, 09:26 AM Reply Like
  • kmi
    , contributor
    Comments (4040) | Send Message
     
    Yep, a lot of it ends up being about refinery capacity and capability since those are the guys buying the crude. Where the refineries are and what they need to operate.

     

    This is one reason why North East refineries were under pressure (and Delta Air ended up buying one): they didn't have access to the right product and the cost to change their capability was prohibitive.
    18 Feb 2013, 09:56 AM Reply Like
  • Hendershott
    , contributor
    Comments (1583) | Send Message
     
    Permanent; There are no shipping costs on WTI because we don't ship the stuff. By law, the only place we can export crude to is Canada, coal to Newcastle. The Canadians export 99% of their crude to the US.
    18 Feb 2013, 10:10 AM Reply Like
  • dingojoe
    , contributor
    Comments (230) | Send Message
     
    I guess where I might disagree with you is the idea that NA oil will push out all imports. I do think all light crude imports from W. Africa will be pushed out. Don't think all Middle East imports and imports from Venezuela will because those oils are most similar to old WTI and are best for making diesel which is most lucrative refining market.

     

    I think there is a limit of how much Tar sands oil US refiners want and if/when Keystone II is built that oil very well may be exported. Light shale oil could also overwhelm refining needs and that will be an issue because there are laws against exporting unfinished products from the US.
    18 Feb 2013, 10:34 AM Reply Like
  • kmi
    , contributor
    Comments (4040) | Send Message
     
    More evidence of global oversupply in oil.

     

    "In mid-January, Ibrahim al-Muhanna, an adviser to Saudi oil minister Ali Naimi, rebutted any suggestion that the kingdom had cut output in order to boost oil prices. Muhanna said Saudi production was being driven primarily by customer needs, including seasonally variable domestic demand which had weakened over the previous quarter from the summer peak."

     

    He's dressing it up, but he's definitely saying no one is buying.
    18 Feb 2013, 08:31 AM Reply Like
  • Hendershott
    , contributor
    Comments (1583) | Send Message
     
    Brent pricing is increasingly suspect.
    18 Feb 2013, 10:12 AM Reply Like
  • Rjjr38
    , contributor
    Comments (58) | Send Message
     
    Brent has a lower sulpher content and therefore making it more desireable hence the higher price. Any crisis will drive prices up. Where it will go is anyones guess at this point.
    18 Feb 2013, 09:56 AM Reply Like
  • kmi
    , contributor
    Comments (4040) | Send Message
     
    If you are responding to permanent's question, I should point out you are ignoring the facts that the size of the spread is significant, and that its origin is recent. Sulpher is not the primary underlying cause.
    18 Feb 2013, 10:00 AM Reply Like
  • permanent
    , contributor
    Comments (195) | Send Message
     
    Great, thank you for your profound answers.
    18 Feb 2013, 02:19 PM Reply Like
  • anonymous#12
    , contributor
    Comments (552) | Send Message
     
    Saudi Arabia is cutting exports because demand has been tepid recently. High oil prices are beneficial for the US.

     

    High oil prices are pushing a lot of innovation that is going off behind the curtains.

     

    Solar Energy breakthrough is coming.....
    18 Feb 2013, 06:29 PM Reply Like
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