Publications: The Petroleum Economics Monthly

Breaking Tradition: Regulations, New Supply Sources, New Transport Forms Alter or Destroy Market Relationships (September 2013)

In this report, we look at two of the new and key market relationships. The report begins by examining the Brent/Bakken or “B-to-B” crude oil price spread. For the foreseeable future, Bakken crude will be an Atlantic rather than midcontinent crude, flowing to refineries on the US East Coast. Refiners there are replacing North Sea crude with Bakken. We show that movements in the Bakken spot price are following New York Harbor product prices.

The report also focuses on the Rotterdam-to-US distillate spread. We argue that US refiners are pushing larger and larger distillate volumes into the European market. Over time they will force some refiners there to close. US Gulf Coast refiners can do this because they have access to lower-priced domestic crude oil. In addition, most oil delivered from abroad into the US Gulf is priced off US crude oils rather than being sold at world prices. Countries that refuse to accept the demands for discounts get bumped out of the market. (Nigeria’s sales to the Gulf Coast, for example, are down eighty percent.)

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