By: Bob van der Valk
Dateline: Terry, Montana
November 7, 2010
In July 2010 BP Plc sold its Cushing, Oklahoma oil tanks, which they used as a major tool in controlling the price of West Texas Intermediate crude oil, to raise funds to pay for the Macondo well fire and oil spill disaster in the Gulf of Mexico.
They did lease back 7.8 million barrels of tank storage space at Cushing from the buyer Magellan Midstream Partners LP, which acquired the tanks as part of a larger $339 million transaction, including some of BP's existing oil inventories.
Cushing is the delivery point for the West Texas Intermediate (WTI) crude oil futures contract, the benchmark oil price in the Americas, and storage levels in the tanks have a major influence over the price of oil and fuel.
BP has been force as an oil trader and in the past has leveraged its space at Cushing for in having a trading advantage. They are still the only major oil company in the top three storage space holders with WTI crude oil inventories. The top two are pipeline companies leasing out space to commodities trading firms, in effect putting Wall Street bankers in control of the WTI crude oil price.
The imminent completion of the Keystone XL pipeline by TransCanada is going to increase Canadian crude oil exports and will end this landlocked crude oil storage facility from being a major factor in determining the world price for crude oil.
Instead, companies with access to the huge tank facilities at Cushing will be making their profits the old fashioned way by storing crude and committing it for sale later. The old fashioned “Buy low – sell high” principle will be back in full force.
The Cushing tank farm hold 36 million barrels of crude, which is just enough to supply U.S. oil demand for nearly two full days The 57 tanks BP sold have a capacity of 7.8 million barrels but operational constraints currently restrict usable capacity to 5.5 million barrels or 15% or the total capacity of the Cushing tank farm.
An additional 2 million barrels of storage is in the planning stages of being built anticipating the pipeline start up bringing in more Canadian oil imports in early 2013.
In June 2009 Attorney General Drew Edmondson sued BP for engaging in the unfair and deceptive practice of manipulating, and of attempting to manipulate, gasoline and crude oil prices in connection with the trading of energy futures on commodity trading markets.
He alleged that the manipulation took place from 2002 until present, through BP's "acquiring and hoarding short-term supplies of gasoline and crude oil".
Drew Edmondson retired this year after losing a run for the Oklahoma governorship in this year’s primaries. And BP may not recover financially enough from the expense of covering the damages and fines related to the Gulf oil spill for them to continue to be a market maker for crude oil pricing. What a difference a year makes in the crude oil trading business.
Showing posts with label Contango. Show all posts
Showing posts with label Contango. Show all posts
Monday, November 8, 2010
Friday, April 17, 2009
Another Day - Same Old Story for Crude Oil and Gasoline Prices
The van der Valk Gas Price Advisory for 4-17-09
Dateline: Issaquah, Washington
April 17, 2009 12:30 PM PST
By: Bob van der Valk
The May WTI crude oil price is up 35 cents to $50.33 a barrel at the close today. The wholesale spot market price for gasoline and diesel went up about a penny per gallon almost in concert with the crude oil price
It's another day - same old story in the petroleum markets.
First - The US Federal Reserve announced a 1.5% month on month decline in industrial production and capacity yesterday. Crude oil prices reacted the other way of expectations by going up this morning in reaction to that bad news
Second - Last week the International Energy Agency, headquartered in Paris, lowered its forecast for global oil demand for this year by 1 million barrels a day down to 83.4 million barrels, which is 2.4 million barrels a day below the 2008 level.
Third - US crude oil inventory levels are now at a 20-year high and refineries are running at just 75% of their current capacity. Fuel conservation has forced the oil companies to reevaluate their 2009 game plan in view of the uncertainties in our economy.
Fourth - Gasoline prices went up some more this week. It's no wonder the average motorist cannot figure out what will be happening to fuel prices in the next month or for that matter the rest of the year. The US average price for gasoline is hovering around $2.05 per gallon today per the AAA fuelgaugereport. The price on the West Coast is still around $2.32 per gallon.
Crude oil will continue to hover around the $50 per barrel mark when at the same time gasoline and diesel prices will be increasing steadily upward. On the West Coast the average price for gasoline is predicted to be $2.50 by Memorial Day and $3.00 by the middle of summer if the current trend continues but... you never know what may be around the corner when a world crisis, weather or refinery problems causes prices to go haywire again. Retail diesel prices will stay about 10 cents per gallon above gasoline prices. The remainder of the country will follow suit and their average price for gasoline will be around $2.50 per gallon by mid-summer.
Refiners have been successful in putting their foot firmly on the hose to constrict the flow of fuel to the market. They have reduced utilization below capacity before their usual planned, maintenance-related springtime reductions. Some shut production down completely earlier this year in order to perform spring maintenance known as turn-a-rounds. The combination of planned and unplanned reductions put 2009 refinery use at its lowest level in the last four years.
The US petroleum industry understands one thing very well and that is that you have to continue to make a profit in order to stay in business. It's either that or going broke and then they will be out of a job.
Go aplusk!
Dateline: Issaquah, Washington
April 17, 2009 12:30 PM PST
By: Bob van der Valk
The May WTI crude oil price is up 35 cents to $50.33 a barrel at the close today. The wholesale spot market price for gasoline and diesel went up about a penny per gallon almost in concert with the crude oil price
It's another day - same old story in the petroleum markets.
First - The US Federal Reserve announced a 1.5% month on month decline in industrial production and capacity yesterday. Crude oil prices reacted the other way of expectations by going up this morning in reaction to that bad news
Second - Last week the International Energy Agency, headquartered in Paris, lowered its forecast for global oil demand for this year by 1 million barrels a day down to 83.4 million barrels, which is 2.4 million barrels a day below the 2008 level.
Third - US crude oil inventory levels are now at a 20-year high and refineries are running at just 75% of their current capacity. Fuel conservation has forced the oil companies to reevaluate their 2009 game plan in view of the uncertainties in our economy.
Fourth - Gasoline prices went up some more this week. It's no wonder the average motorist cannot figure out what will be happening to fuel prices in the next month or for that matter the rest of the year. The US average price for gasoline is hovering around $2.05 per gallon today per the AAA fuelgaugereport. The price on the West Coast is still around $2.32 per gallon.
Crude oil will continue to hover around the $50 per barrel mark when at the same time gasoline and diesel prices will be increasing steadily upward. On the West Coast the average price for gasoline is predicted to be $2.50 by Memorial Day and $3.00 by the middle of summer if the current trend continues but... you never know what may be around the corner when a world crisis, weather or refinery problems causes prices to go haywire again. Retail diesel prices will stay about 10 cents per gallon above gasoline prices. The remainder of the country will follow suit and their average price for gasoline will be around $2.50 per gallon by mid-summer.
Refiners have been successful in putting their foot firmly on the hose to constrict the flow of fuel to the market. They have reduced utilization below capacity before their usual planned, maintenance-related springtime reductions. Some shut production down completely earlier this year in order to perform spring maintenance known as turn-a-rounds. The combination of planned and unplanned reductions put 2009 refinery use at its lowest level in the last four years.
The US petroleum industry understands one thing very well and that is that you have to continue to make a profit in order to stay in business. It's either that or going broke and then they will be out of a job.
Go aplusk!
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