Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list
Oil

Analysis: Bakken discounts deepen as competition heats up

LNG | Natural Gas | Natural Gas (North American) | Oil | Crude Oil | Oil Risk

A national climate policy or US energy dominance?

Oil

Platts Market Data – Oil

Capital Markets | Commodities | Oil | Crude Oil | Refined Products | Fuel Oil | Gasoline | Jet Fuel | Naphtha | Marine Fuels | Equities | Financial Services | Banking | Non-banks | Private Markets

North American Crude Oil Summit, 3rd annual

Oil | Crude Oil

Belarus says Russia offers compensation for oil customs duty losses: report

Analysis: Bakken discounts deepen as competition heats up

Houston — Bakken Blend differentials at terminals close to North Dakota wellheads held their lowest assessment since December Tuesday, closing at the calendar-month average of the NYMEX light sweet crude oil contract (WTI CMA) minus $6.25/b.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

While one factor dragging on Bakken differentials has clearly been a tight Brent/WTI spread -- trading around 42 cents/b Tuesday, well in from the steady $2/b seen this summer -- the return of Louisiana Light Sweet to the Midwest market may also be having an impact, according to traders.

One trader said there was an increase in volumes heading up the Capline pipeline, however, differentials suggest LLS is still too expensive, at least compared to Bakken. Platts assessed LLS at WTI plus $1.15/b Tuesday.

Considered by some to be the "champagne of crudes," it is unclear what appeal LLS still has for a Midwest refiner as margins for LLS actually -- and unusually -- lag those for Bakken.

Article Continues below...

S&P Global Platts data shows LLS cracking margins in the Midwest closed at $3.30/b Monday, compared to Bakken cracking margins of $6.37/b. In fact, the advantage of cracking Bakken has grown steadily since August.

Platts margin data reflects the difference between a crude's netback and its spot price.

Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.

What is clear however, is that the steeper discounts available for Bakken provide the biggest incentive for a Midwest refiner.

The cost of getting Bakken to this market is around $3.48/b, according to Platts netback calculations, compared to just $1.02/b for LLS.

These costs make up a significant portion of the Bakken discount.

Further, LLS moving up the Capline after many years of relative inactivity does not necessarily suggest a new trend is in the making. However, recent pipeline reversals between Texas and Louisiana mean more Permian crudes are capable of reaching Louisiana refineries, and thus, if priced accordingly, could displace incremental volumes of LLS from its home market.

With current pipeline capacity out of North Dakota typically full, the marginal Bakken barrel often gets to market via rail, and this cost has traditionally sets the floor to Bakken's discount to WTI. And part of the recent downturn in Bakken could be chalked up to an increase in railed volumes to the US Atlantic Coast, as Bakken cracking margins there are again in the black.

In fact, Association of American Railroad's latest monthly and weekly data shows crude and refined product rail movements appear to have bottomed, having grown in September from August.

Weekly data bears this out as well, showing increases in three of the last four weeks.

It remains to be seen how long this will last, however, should Energy Transfer Partners Dakota Access Pipeline go ahead as planned.

Linefill for the pipeline could boost Bakken differentials, potentially making the grade too expensive to rail east. However, the devil is in the details.

Traders and analysts have pegged Dakota Access pipeline tariffs between $4.50-$5.50/b for uncommitted shippers between North Dakota and Patoka, Illinois. A further $6.50/b would be needed to bring the crude south from Patoka to Nederland, Texas, sources have said.

If this $11-$12/b combined pipeline estimated cost were to pan out, it would be more expensive than the $10.20/b Platts assumes in its Bakken USAC rail-based netback calculation.

--James Bambino, james.bambino@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com