US Oil Production Is Becoming More Economical



US oil production could become more economical

The WTI Cushing-Midland spread has been below $1 since late January 2019, and in some instances, it’s turned negative. In August 2018, the spread was as high as $18. Sunrise Pipeline, which has a capacity of 300,000–350,000 barrels per day, has been operational since November 2018. Its operations could be behind the contraction in the spread, as it connects the Permian Basin to Cushing, Oklahoma.

The contraction in the spread could cause US oil production to become more economical. By the end of 2019, further improvements in pipeline infrastructure could enhance US crude oil exports.

Noble Energy (NBL) expects the EPIC crude pipeline to become operational in the third quarter, which will likely reduce the price discount of its oil produced to grades of oil in the Gulf Coast.

If the demand for oil slows, as we discussed earlier in this series, the impact of the supply cut on oil prices could start to fade in 2019.

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