3Q 2020 –
- Crude pricing has stalled as seasonal demand wanes and rising COVID-19 cases globally increase the risk of widespread shutdowns. Meanwhile, rising Libyan production and the potential for OPEC+ to increase production at the beginning of 2021 is further threatening the global supply/demand balance. OPEC+ is due to meet in late November to decide whether it will increase production to start 2021 (consistent with the existing plan) or maintain current production cuts until global demand shows more signs of improvement. Without an extension of existing cuts, BTU Analytics expects further pricing pressure until global demand begins to accelerate in Spring 2021.
- Regional crude pricing across the US is expected to remain tight to WTI in the near term as production is expected to continue to fall and long-haul pipelines are unconstrained. This is especially true in the Rockies, where the expected expansion of the Dakota Access Pipeline could nearly double existing capacity from 0.6 MMb/d to 1.1 MMb/d by 3Q 2021. This would likely lead to minimal crude-by-rail volumes flowing to the East and West coasts, as well as potentially limiting pipeline flows to Guernsey. Guernsey pricing would therefore need to further tighten in order to compete for Bakken barrels.