The Daley Note: August 3, 2023
The 1st of what was to be 3 restock installments into the Strategic Petroleum Reserve, SPR, Big Hill Site began August 1, 2023. The 3rd installment’s request for proposal to purchase 6 MMbbls in October and November was withdrawn Aug 2nd as crude oil prices climbed above $80/bbl. EDA believes the WTI price improvement was due to a combination of OPEC cuts, low storage levels and SPR restocks. The SPR continues to communicate they are committed to restocking the US Oil reserves but at a later date when crude oil prices are in the SPR’s desired range of $67 - $72/bbl.
The 1st installment of 3.1 million barrels of sour crude oil will make its way from the Gulf of Mexico at an average price of $73.37/bbl. The SPR Request for Proposal to purchase crude oil has stipulated the crude oil must be a sour quality and a US produced barrel. This will generally exclude production from the market hubs of Patoka, Cushing and Guernsey as they are the typical carriers of Canadian Crude Oil. East Daley thinks the required sour crude oil will primarily come from the Gulf of Mexico production. We believe the SPR restock will not be a significant supply and demand intrusion as Louisiana Gulf Coast Exports have been averaging ~650 Mb/d in the 1H23 and Louisiana Gulf of Mexico production is ~1.5 Mb/d.
At an average rate of 100,000 b/d, the 36” pipeline (~800Mb/d capacity) connection to the Big Hill Site from Nederland, TX Sun Terminal & P66 Beaumont Terminal can easily handle this production influx. Big Hill will be restocked by 5 successful bid winners; Atlantic Trading & Marketing at 1MMbbls, Exxon Mobile at 900 Mbbls, Gunvor USA at 600 Mbbls, Macquerie and Sunoco at 300 Mbbls each.
The 2nd installment to restock SPR’s Bill Hill site is September 1-30th. 3.2 MMbbls will be delivered by Macquerie Commodities & Trading at 1.5 MMbbls, Shell and Sunoco at 600 Mbbls each and Atlantic Trading & Marketing at 500 Mbbls.
In addition to the 6.3 MMbbls the SPR is buying to restock their caverns, they have also cancelled 140 MMbbls in mandated sales scheduled from 2024 through 2027. By YE27 the SPR stock should be at 342.3 MMbbls, which is ~50% of the normal SPR stock level of 637 MMbbls between 1990 & 2020. The purchases are not enough to drive prices significantly higher by itself, and there is a long way to go to refill the SPR at this rate. – Kristine Oleszek
Upcoming Webinar: Organically Grown: The Shifting Landscape For Growth in the Midstream Sector
August 16, 2023 | 10 AM MT | Online Webinar
Understanding how the commodity markets are influencing the business risk of the assets midstream companies own is a core component of the East Daley process and key to understanding how the market will evolve. This webinar will focus on reviewing the Base Business Risk Indicator (formerly the Treadmill) a key East Daley analysis that ties fundamental commodity analysis to the commercial outcomes of assets across the gas, oil, and NGL sectors. We will review where commodity markets are headed and which assets are capturing value, which are losing value, and pontificate on what could change.
Energy Data Studio
East Daley Analytics has launched Energy Data Studio, a platform for our industry-leading midstream data and commodity production forecasts. All clients have access to the new client portal. If you have not yet logged in, please fill out the form to request a registration email be resent.
Energy Data Studio leverages our G&P data set for insights into midstream assets across every major oil and gas basin in North America. Users can navigate detailed visual dashboards by region, pipeline, or individual asset to understand crude oil, natural gas and NGL supply at the most granular level.
Energy Data Studio is available through data downloads from the visual interface, in Excel files, or as a direct feed delivered into subscribers’ workflow via secure file transfer. To learn more about Energy Data Studio, please contact insight@eastdaley.com.
Review the Year Ahead in Dirty Little Secrets
The 2023 Dirty Little Secrets is Now Available! Is Midstream on the cusp of another infrastructure wave? Find out in our new annual report.
Dirty Little Secrets reviews the outlook for Midstream and commodity markets in 2023 and the years ahead. East Daley discusses the outlook for crude oil, natural gas and NGLs and the impacts to midstream assets in our 2023 Dirty Little Secrets annual market report. Click here for a copy of the 2023 Dirty Little Secrets report.
The Daley Note
Subscribe to The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices and EDA research likely to affect markets in the short term.
