WTI Cushing-WTI Midland spread
The WTI Cushing-WTI Midland spread is a key indicator to watch for Permian producers. The spread continued to fall in the week ending September 21. The spread fell to $11.5 per barrel by the end of last week—compared to the highs of $17.8 per barrel in the week ending August 31. However, the current spread is still high compared to the previous month’s low of $12.0 per barrel and the one-year average of $5.5 per barrel.
The spread saw new highs last month amid concerns about pipeline constraints in the Permian region. The recent announcement of new pipeline projects in the region could be the main reason behind the fall in the WTI spread. Energy Transfer Partners’ (ETP) announced that it will proceed with its plans to construct the Permian Gulf Coast pipeline.
Impact on Permian producers
The decline in the price differential is positive for Permian producers. The decline helps average realized sales prices improve. Major Permian producers include Pioneer Natural Resources (PXD), Diamondback Energy (FANG), and WPX Energy (WPX). Most of the producers hedge a portion of the losses arising due to these price differentials.
Next, we’ll discuss the best-performing upstream stocks last week.