AM-13-35 The Impact of Resurgent North American Crude Production on Refining Crude Slate

Description:

Within North America, crude production is surging back to and beyond historical production levels. Both tight oil and oil sands are to provide an additional two million barrels per day in the next three years as producers get ever faster at bringing barrels to market. All this stands to further stress existing logistics and refining markets to the south as barrels do not fit, physically or quality wise. However, Wood Mackenzie's analysis suggests that this crude supply surge offers opportunities for refiner and producer alike. Based on a Relative Refining Value study of light sweet crudes in various markets, we see that the best values are held on the East and West Coasts. Currently, logistics don't offer those as readily available markets as one would have to rely on rail offloading, but this presents options just the same. We also find that the question of market depth emerges. How much of the crude economically fits into each market and how ultimately do the flows resolve themselves? Further to this we find that some light sweet tight oil blends may be best suited on the West Coast to replace declining Alaska North Slope. Blends between Bakken and San Joaquin Valley Heavy or Canadian Cold Lake are nearly an exact match for ANS. But here again, can these barrels be brought together? There are undoubtedly a number of questions needing an answer to address the substantial economic driving force between discounted Mid-Continent FOB crude prices as their value on the coasts demands it. The complications offer rewards6so who will act to leverage this continental competitive advantage?