Why is the value of a barrel of oil running about $20 lower than last month for MT?
Marlene, I haven't seen a December production check yet. As a result I don't know if what you're seeing is some sort of unique situation (with the well/company you're dealing with), or if it is common across all Fallon County production.
Just speculating but if there is a wide spread drop in pricing... The most likely answer is a bottle neck in pipeline capacity. Periodically we've (MT, WY, ND) been hit hard by a price differential because there was a surplus of oil supply relative to the available capacity to carry the oil to markets. At various times in the past this "differential" between the stated West Texas Intermediate (WTI) price and that price we've been paid has exceeded $20 per barrel. Most commonly it runs closer to 5% to 10% (ie... $90 WTI = $81 to $86 in MT).
However, lately we've actually enjoyed a premium to WTI pricing. On November checks (october oil sales) for Fallon Co, MT oil; Denbury paid $95.06 and Conoco paid $90.84. Meanwhile West Texas oil was sold at $88.11 for the same month. I can't say for sure but I suspect WTI prices are starting to suffer from similar pipeline issues because of the boom in Eagle Ford Shale production. Don't know if this helps answer your question but it is common to see our MT oil prices vary significantly from the 'quoted' price of oil (ie... the NYMEX or WTI prices).
Thanks for your effort in answering my concern. Have a better understanding now.
Eastern MT said:
Marlene, I haven't seen a December production check yet. As a result I don't know if what you're seeing is some sort of unique situation (with the well/company you're dealing with), or if it is common across all Fallon County production.
Just speculating but if there is a wide spread drop in pricing... The most likely answer is a bottle neck in pipeline capacity. Periodically we've (MT, WY, ND) been hit hard by a price differential because there was a surplus of oil supply relative to the available capacity to carry the oil to markets. At various times in the past this "differential" between the stated West Texas Intermediate (WTI) price and that price we've been paid has exceeded $20 per barrel. Most commonly it runs closer to 5% to 10% (ie... $90 WTI = $81 to $86 in MT).
However, lately we've actually enjoyed a premium to WTI pricing. On November checks (october oil sales) for Fallon Co, MT oil; Denbury paid $95.06 and Conoco paid $90.84. Meanwhile West Texas oil was sold at $88.11 for the same month. I can't say for sure but I suspect WTI prices are starting to suffer from similar pipeline issues because of the boom in Eagle Ford Shale production. Don't know if this helps answer your question but it is common to see our MT oil prices vary significantly from the 'quoted' price of oil (ie... the NYMEX or WTI prices).