PIRA Energy Group Announces New Analytical Report on North American Midcontinent Oil Markets

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New York-based PIRA Energy Group has launched a new North American Midcontinent Oil Forecast that will cover the emerging shale and tight oil production plays of the U.S. in addition to western Canada and Cushing/PADD II.

PIRA Energy Group
PIRA expects Cushing crude stocks to continue falling in August, and then begin climbing toward new record levels by year-end.

New York-based PIRA Energy Group has launched a new North American Midcontinent Oil Forecast that will cover the emerging shale and tight oil production plays of the U.S. in addition to western Canada and Cushing/PADD II. Published early each month, PIRA’s report provides short-term crude and products supply/demand balances as well as price and margin forecasts for the major onshore crude regions and key hubs. It focuses on production, transportation, storage, and refinery demand in key areas such as onshore western Canada, Cushing, the Rockies, the Midwest, Northern and Southern Plains, and the Southwest. Special attention is paid to shale and tight oil developments, including Bakken, Eagle Ford, Granite Wash, Mississippi Lime, Permian Basin, Niobrara, Utica, Uinta, Tuscaloosa Marine Shale, Monterey, and others.

PIRA has forecast near-term production for key basins using models based on type curves, initial production rates, decline rates, and rig counts; and we will also report on the evolving balance between increasing supply and the development of takeaway capacity. PIRA will also monitor announced and proposed transport projects in each region, comparing them with its supply forecasts and analyzing the impact on crude balances and price differentials.
PIRA’s inaugural report generally states that Midcontinent crude differentials generally improved, and that crude production and oil-directed rig counts continued to grow, with oil production in the U.S. moving more toward “pad” drilling, in which multiple wells are drilled from the same platform. For August, refiners will take advantage of continuing strong margins, running as much crude as they physically can.

In regards to the Cushing Area of Oklahoma, Kansas, North Texas, PIRA believes the recent jump in oil-directed horizontal drilling rig activity suggests higher volumes are coming on top of already steady production growth. Another major potential growth area is in the Granite Wash of the Texas panhandle and western Oklahoma. Cushing will not likely reconnect to Gulf Coast crude markets for pricing purposes until the Seaway pipeline is expanded early next year. Logistical constraints will be further lifted when the southern leg of the Keystone XL Pipeline is completed late next year. PIRA expects Cushing crude stocks to continue falling in August, and then begin climbing toward new record levels by year-end.

In regards to North Dakota and the Bakken play, PIRA believes that rail is likely to provide a better Bakken netback than pipelines in the near term, driven by a continuing WTI discount to LLS combined with a Canadian/Bakken discount to WTI. The WTI-LLS discount should narrow considerably next year with an expanded Seaway Pipeline. Once constraints from Cushing and Canada are removed, pipeline transport will provide a better netback, but this is still a year or two off. Until then, there will be strong incentive to shift pipeline barrels to rail, freeing up pipeline space to Clearbrook or Guernsey, allowing additional Canadian crude to flow to the Midwest or Rockies.

The new North American Midcontinent Oil Forecast is provided to subscribers of PIRA’s Global Oil Retainer Service and will be essential reading for companies that produce, refine, trade or transport crude in Canada and the U.S., as well as those who invest in such companies.

PIRA Energy Group, founded in 1976, is an international energy consulting firm specializing in global energy market analysis and intelligence. PIRA’s Retainer Client Services are renowned for their comprehensive research and commercial analysis of global crude oil and refined petroleum products, natural gas, LNG, natural gas liquids, biofuels, coal, electricity, emissions and freight markets.

For more information on PIRA Energy Group’s coverage of the global oil market, please contact Jeff Steele at PIRA at 212-686-6808, or jsteele(at)pira(dot)com.

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