The Bull Market In Oil Nobody Is Appreciating

I often say – there’s ALWAYS a bull market somewhere in energy – and right now it is in heavy oil.

Heavy oil should – and normally does – trade at a discount to light oil because it is more expensive to refine. But now that gap is closing, and now heavy oil actually trades at a premium in many places around the world. Energy investors should take note!

Yes, this is a GLOBAL phenomenon; it’s a major shift.  To show you what I mean, here are some price charts that show what’s happening:

The Mars benchmark for the Gulf of Mexico produced medium sour is trading at a premium to Light Louisiana Sweet.

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And heavy Louisiana Sweet, which normally trades at a discount to Light Louisiana Sweet has also been trading at a premium for much of 2019.

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I showed you that the heavier Mars Gulf of Mexico crude was trading at a premium to Light Louisiana Sweet. Mars is also trading at a premium to WTI.

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What should be very concerning to shale producers is that a similar effect is also already being seen globally, as several medium to heavy sour crude grades produced in the Middle East are now trading at a premium to Brent.

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Saudi Arabia set the official selling price for its Arab Heavy grade for February to the U.S. at a US$0.50 premium to the Argus Sour Crude Index, the first premium in at least 10 years.

Arab Heavy is also selling at a premium to Brent and the heavier Russian Ural crude is also at multi-year highs relative to lighter blends.

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Another Middle East grade Oman – which has a higher sulfur content than European oil – also rose above the lighter London benchmark and has traded at a premium.

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Bloomberg recently reported that in Asia the state-run energy giant PetroChina had been selling Venezuelan Merey oil in February at a premium of about $5 a barrel to WTI.

Here in Canada, heavy-crude prices have surged since Alberta Premier Rachel Notley mandated a production curtailment of 325,000 barrels a day – though it’s not above light oil prices yet.

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