Posted on 08/23/2007 3:36:50 PM PDT by saganite
Rocky Mountain oil producers are still smarting from an 18-month supply glut that has left their petroleum priced well below national averages.
Rising imports of oil from Canadian tar sands, increased domestic production and a series of refinery shutdowns have left the Rockies awash in crude.
At the peak of the oil surplus in February 2006, some Rocky Mountain producers were forced to sell their crude for $34 a barrel - a gap of nearly $26 from the prevailing national price then of about $60.
"The most obvious answer for this (price) decline has been an increase in Canadian crude that has been able to come down to the Rockies," said John Kingston, global director of oil for research firm Platts.
The difference between national prices and a typical regional price in Wyoming has since diminished to $8 a barrel. But the margin remains a sore point and a topic of discussion for Western oil producers, particularly in the northern Rockies and Plains, where prices were the lowest.
"We encountered the problem, and it really caught us by surprise," said Steve Frazier, Denver-based vice president of Klabzuba Oil & Gas Inc., a firm that operates mostly in Wyoming and Montana.
"It was a perfect storm that came together and really sent prices down," said Frazier, who also serves as a Montana representative for the Independent Petroleum Association of Mountain States. "Everyone pretty much had to grit their teeth and deal with it."
(Excerpt) Read more at denverpost.com ...
There’s more than that at work here. The lack of pipeline capacity and refining capacity in that region forces the producers to sell at a much lower price. Even heavy oil sells for more than the western producers are getting.
bfl
$2.47 in urban central AZ.
BUMP!
Yep. Lack of pipeline cpapcity has been hurting prices up here for a while. Discounts of $25-30 dollars a barrel are not uncommon, and Canadian crude coming down hurts the producers here in the long run. It also provides some disincentive to drill for what had been the premium mid-continent oil, priced at one time on par with WTI. It is not the quality or refinability of the oil, just the capacity to transport it.
Not enough local refining capacity/competition. It costs too much to ship the crude out, hence the glut.
Not the Bakken crude from Montana and North Dakota, at least prior to the transport problem.
If you check back the problem is not one of inferiority to WTI, it is lack of transport and refining capacity.
Historically, prices for WTI and Bakken crude were on par until the tar sand crude started coming in and bumped the Bakken crude off the pipeline.
The Canadians oil is low gravity, heavy crude, the Bakken oil is 35 to 37 gravity sweet crude with a lot of aromatics.
Dorgan is making comments again about the geological survey due out next year. Maybe when the survey hits the newsstands there will be some impetus to get the infrastructure built out there. Hopefully, even a refinery or 2. There’s certainly plenty of open space for it!
I’m sure the oil companies are behind this fiendish plot. ;’)
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