padd 2 presentation - platts energy forum november, 2011 padd 2 crude oil market dynamics today’s...

Katherine Spector

CIBC Commodities Strategy

[email protected]

NY Energy Forum November, 2011

PADD 2 Crude Oil Market DynamicsToday’s Market & Five Year Forward View

New York Energy Forum, November 22, 2011 (K. Spector) 2

• How we got here• Recent new information• Looking five years ahead

PADD 2 Historically, Now, & In the Future


(Where Is PADD 2 Again?)

Alberta, CA

Cushing, OK


Historically, PADD 2 Was a Taker of Crude

-4

-3

-2

-1

0

1

2

3

4

Average 2000-2010

mbd

Other PADDs Fed >50% of P2 Refinery Needs


-500

0

500

1000

1500

2000

2500

3000

Average 2000-2010

kbdPipe Capacity Inbound

Pipe Capacity Outbound

So Pipelines Flowed Into PADD 2, Not Out


PADD 2Supply

PADD 2Disposition

Refinery Runs

PADD 2 Production

Net Foreign Imports

Inbound Intra-PADD


But Quite Suddenly, PADD 2 Supply Took Off

339

491

-100

0

100

200

300

400

500

600

700

800

900

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

kbd

Padd 2 Production (mostly Bakken) Foreign Imports (mostly Canadian)

Cumulative Supply Growth Into PADD 2: Thanks To Alberta & The US Bakken

CIBC Commodities Strategy, EIA


PADD 2 Demand (Refinery Use)... Didn’t

830

114

-200

0

200

400

600

800

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

kbd

Cumulative Change In PADD 2 Supply (Local + Foreign)

Cumulative Change In PADD 2 Refinery Capacity

Cumulative Supply Growth Into PADD 2 Versus Regional Refinery Capacity Growth



Inter-PADD Flows From PADD 3 Were Displaced

-3

-2

-1

0

1

2

3

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

mbd

Net PADD 2 Inter-PADD Inflows PADD 2 Supply Deficit Inbound Pipe Capacity

Net PADD 2 Inter-PADD Inflows Versus PADD 2 Supply Deficit



But Cushing Inventories Still Climbed(Storage Capacity Did, Too)

0

10

20

30

40

50

60

2004 2005 2006 2007 2008 2009 2010 2011

mb

Average Cushing Crude Stocks Cushing Storage Capacity

Net PADD 2 Inter-PADD Inflows Versus PADD 2 Supply Deficit



WTI Parted Ways With Global Oil Markets

$(30)

$(20)

$(10)

$-

$10

$20

$30

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

$/bbl

Versus BrentVersus DubaiVersus LLS

WTI Weakened Vs Almost Every Other Crude...


$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

May-10 Nov-10 May-11 Nov-11

$/bblNYMEX Heating Oil Crack to WTINYMEX Heating Oil Crack to Brent

... And Versus Refined Products Too



WTI Times Spreads Were Also Pressured(As One Would Expect Given Inventories)Brent Sees Backwardation First


$(25)

$(20)

$(15)

$(10)

$(5)

$-

$5

$10

$15

Nov'08 Feb'09 May'09 Aug'09 Nov'09 Feb'10 May'10 Aug'10 Nov'10 Feb'11 May'11 Aug'11 Nov'11

$/bbl

WTI Fwd Spread

Brent Fwd Spread

Backwardation

Contango


-1200

-1000

-800

-600

-400

-200

0

200

400

600

Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11

kbdCumulative Chg in Bakken + AB Bitumen

Cumulative Change in North Sea

Brent Has Issues Too, But Still Attracted Volumes

-1200

-1000

-800

-600

-400

-200

0

200

400

600

Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11

kbdCumulative Chg in Bakken + AB Bitumen

Cumulative Change in North Sea

North Sea Production Only Going One Way


24%

26%

28%

30%

32%

34%

36%

38%

40%

Oct-07 Oct-08 Oct-09 Oct-10 Oct-11

But Even So Trading Volumes Shifted To Brent


Brent Volume As % Of Total WTI + Brent Volume


But Wait! The Market Responds to Dislocation

-

10

20

30

40

50

60

70

80

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

kbd

Ex-PADD 2 Barge Volumes Ramp Up


400

450

500

550

600

650

700

750

800

'08 '09 '10 '11

kbd

$(30)

$(20)

$(10)

$-

$10

$20

$30

$/bbl

Railed Oil (left)WTI-Brent Spread (right)

Railed Volumes Also Rise...



Cushing Crude Inventories Fell Accordingly

29

31

33

35

37

39

41

43

Jan'11 Feb'11 Mar'11 Apr'11 May'11 Jun'11 Jul'11 Aug'11 Sep'11 Oct'11

million bblCushing Inventories Fall Nearly 12 mb From Early April Peak


41.9 mb

30.1 mb


Mo.2-Mo.4 As % of Flat Price

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

35-4

0%

40-4

5%

45-5

0%

50-5

5%

55-6

0%

60-6

5%

65-7

0%

70-7

5%

75-8

0%

80-8

5%

85-9

0%

90-9

5%

Cushing Crude Storage Capacity Utilization

Historical WTI Spreads At Cushing Storage Capacity Utilizations (Range & Average)


Most recent week

WTI Spreads Rallied; Brent Premium Eased


But Pipeline Capacity Is Ultimately Still NeededContender #1: Transcanada’s Keystone Project — Down But Not Out

• Phase 1: Hardisty, ABto Steele City, NB,Patoka/Wood River, IL —COMPLETED Jun’10

• Phase 2: Steele City,NB to Cushing, OK —COMPLETED Feb’11

• Phase 3: Cushing, OKto Houston/Port Arthur,TX — DELAYED

• Phase 4: Hardisty, ABto Steele City —DELAYED


Pipeline Capacity Prospects Cont’dEnbridge/Enterprise Wrangler:• Estimated online mid-2013, 800 kbd ultimatecapacity

Enbridge/Enterprise Seaway Reversal:• Estimated 150 kbd online 2Q’12, 400 kbdultimate capacity mid-2013

CIBC Commodities Strategy, TEPPCO CIBC Commodities Strategy, Enbridge


So Where Does This Leave Us?

-4.0-3.5-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.54.0

Average 2000-2010 2011 2016 est.

mbd

Intra-PADD Inbound

Foreign Imports

PADD 2 Production

Refinery Runs

PADD 2 Production & Canadian Imports Will Displace More USG Crude



0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

PADD 2 Production Foreign Imports PADD 2 Refinery Capacity

Regional PADD 2 Crude Supply Versus Refinery Capacity

CIBC Commodities Strategy, EIA, CAPP

PADD 2 May Not Need Any PADD 3 Crude At All...


-3000

-2000

-1000

0

1000

2000

3000

Average 2000-2010 2011 2016 est.

kbdPipe Capacity Inbound Pipe Capacity Outbound

PADD 2 Pipeline Capacity: Inbound Versus Outbound


How Would Those Pipeline Additions Stack Up?

Keystone XL

Wrangler

Seaway


Canada-PADD 2 Pipeline Capacity Not An Issue

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

kbd

20%

30%

40%

50%

60%

70%

80%Canada-PADD 2 Pipeline Capacity (left)Canada-PADD 2 Pipeline Capacity Utilization (right)

PADD 2 Pipeline Capacity: Inbound Versus Outbound



Origin of PADD 3 Imports, Average 2000-2010


What PADD 3 Imports Could Be Displaced?

North America

Sub-Sah. Africa

Latam/S. America

MENA

W. Europe

E. Europe

OPEC(58%)

Non-OPEC(42%)


Other Odds & Ends...• A greenfield refinery in PADD 2?Dakota Oil Processing is planning a (small) 20 kbd refinery in North Dakota geared towards supplyingdiesel to support Bakken production (rigs, trucks).

• Could Canada focus attention west?Proposed pipeline capacity from Edmonton to the West Coast includes Enbridge Gateway project,KinderMorgan’s Northern Leg of the Trans Mountain system, and other TMX expansions. Canadacurrently exports just ~50 kbd to Asia.


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padd 2 presentation - platts energy forum november, 2011 padd 2 crude oil market dynamics today’s...

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